House of Representatives
15 July 1926

10th Parliament · 1st Session



Mr. Speaker (Hon. Sir Littleton Groom) took the chair at 2.30 p.m., and read prayers.

page 4206

QUESTION

TARIFF

Duties on Petrol.

Mr SCULLIN:
YARRA, VICTORIA

– Is it proposed to give the House a full opportunity to discuss the new tariff duties on petrol before the close of the session?

Mr BRUCE:
Minister for External Affairs · FLINDERS, VICTORIA · NAT

– The proposed duties will be brought before the House for discussion.

page 4206

QUESTION

PARLIAMENTARY ATTENDANTS

Salaries - Attendance Book

Mr MAKIN:
HINDMARSH, SOUTH AUSTRALIA

– I wish, Mr. Speaker, to ask you a question. I should like to know whether there is to be any review of the duties and salaries of the parliamentary attendants, messengers, and others carrying out similar duties?Will they be brought directly under the supervision and control of the Public Service Board, and receive the same rates of payment as are given to other membersof the Public Service holding similar positions, in Commonwealth departments under the direct control of the board?

Mr SPEAKER:

-(Hon. Sir Littleton Broom). - The Public Service Act places the parliamentary officials under the control of the President of the Senate and the Speaker of the House of Representatives, who in respect of them occupy the same position as that of the Board of Commissioners to the other branches of the Service coming under that measure. The officials of the Senate are under the jurisdiction of the President, those of this House under that of the Speaker, and those of the joint departments - Hansard, the Library, and the House Committee - under that of the President and Speaker jointly. The work and remuneration of the officials of all the parliamentary departments have received full consideration, but any member of the staff who is dissatisfied with his treatment, or desires to make any representations concerning his position, can do so through the regular prescribed channels.

Mr MAKIN:

– Will you, sir, have prepared a complete list of the salaries paid be the messengers and others associated with the staff of this House, and obtain from the Public Service Board information as to the salaries which are paid to officers in other branches of the Public Service performing similar duties?

Mr SPEAKER:

– Alist giving the information . the honorable member desires could be supplied. With respect to the suggestion that information should be obtained from the Public Service Board about the salaries paid to similar officials under the board’s control, I may inform the honorable member that in fixing the salaries and wages paid to the officials of the Parliament, particular attention is given to the nature of the duties performed, and regard is had to the wages and salaries paid to officials in corresponding positions in other branches of the Public Service, so that full justice may be done to all on the parliamentary staff.

Mr Makin:

– That has not been done.

Mr SPEAKER:

– I assure the honorable member that the practice I have outlined has been followed.

Dr MALONEY:
MELBOURNE, VICTORIA · ALP; FLP from 1931; ALP from 1936

– In Australia we desire that any office in the Public Service of the Commonwealth shall be attainable by any boy or girl entering the Service; but something in the nature of aristocracy seems to have found its way into tho parliamentary service. Some seven years ago I drow attention to this matter and secured some amelioration of the position. I wish, sir, to ask you whether the attendance book, which must be signed by certain officials only, can be placed on the table of the Library for the inspection of honorable members. I may mention that Mr. King O’Malley at one time insisted that every officer of the department over which he then presided should sign the attendance book, and to set an example he signed his own name at half -past 8 a.m. each morning he visited his office. That caused a little revolution at the time.

Mr SPEAKER:

– I shall give the matter consideration.

page 4206

QUESTION

BOUNTY ON COTTON YARN

Mr E RILEY:
SOUTH SYDNEY, NEW SOUTH WALES · ALP

– Will the Minister forTrade and Customs intimate when it is likely that he will bring forward his proposal topay a bounty on the manufacture of cotton yarn?

Mr PRATTEN:
MARTIN, NEW SOUTH WALES · NAT

-The whole question is being very carefully considered by the Government, and at an early date an announcement will be made.

Mr E RILEY:
SOUTH SYDNEY, NEW SOUTH WALES · ALP

– Before the close of the session?

Mr PRATTEN:
MARTIN, NEW SOUTH WALES · NAT

– Yes.

page 4207

QUESTION

COCKATOO ISLAND DOCKYARD

Sydney City Council’s Contract

Mr MAHONY:
DALLEY, NEW SOUTH WALES

– Is the Prime Minister in a position to make available to honorable members the report he received from the Public Accounts Committee in reference to the contract which was let by the City Council of Sydney to the Cockatoo Island Dockyard ?

Mr BRUCE:
NAT

– I shall look into the matter. I do not think there is any objection to the report being made available.

page 4207

QUESTION

TAX ON CROWN LEASEHOLDS

Mr CHARLTON:
through Mr. E. Riley

asked the Treasurer, upon notice -

  1. Whether the whole tax due on Crown leaseholds has yet been collected?
  2. If not, how much is still outstanding?
Dr EARLE PAGE:
Treasurer · COWPER, NEW SOUTH WALES · CP

– The answers to the honorable member’s questions are as follow : -

  1. No.

    1. In view of a recent judgment of the High Court it is impossible to state a definite figure. Assessments of land tax on Crown leaseholds were made by the Department of Taxation for all years in which,the tax operated. The assessments were based on valuations ascertained by the departmental methods of valuations then employed. Some of these assessments had, at the 30th June, 1926, been reviewed by the adoption in them of lower valuations ascertained by the application of the rules of valuation recommended by the royal commission which considered the subject in 1924. This revision resulted in very great decreases in the tax originally assessed; in some cases, the tax was entirely wiped out. At the 30th June, 1926, the amount unpaid of the land tax assessed as stated above, was £984,832 for all years. The department had, since April, 1925, when the Government decided to adopt the rules of valuation recommended by the royal commission, taken active steps to require Crown lessees to pay part of their taxes pending final revision of their assessments. The amount of £984,832 would probably be reduced to not more than £300,000 at the conclusion of the work to apply the royalcommission’s rules of valuation. On the 5th July last, Mr. Justice Rich, of the High Court, delivered judgment in Brisbane on an appeal by Mr. Edmund Jowett against the valuations applied by the department in accordance with the royal commission’s rules of valuation to three of his Crown leaseholds. The court rejected the valuations thus found, and, by implication, rejected the royal commission’s rules of valuation. The court adopted its own methods of investigation of the valuations, and rejected practically the whole of the evidence of valuations which the department had collected. The court found freehold valuations for the land which were very much lower than those found by the department by the application of the royal commission’s rules of valuation. On the court’s valuations there was no statutory value of the leasehold estates in the land the subject of the appeal, and Mr. Jowett’s assessments are being amended in accordance withthe judgment. It is impossible at present to gauge the effect of the judgment upon valuations in other cases, but if the principles of valuation adopted by Mr. Justice Rich in the Jowett appeal are applicable to other cases, it is possible that very little, if any, land tax is still outstanding on Crown leaseholds.

page 4207

QUESTION

GREAT BRITAIN AND RUSSIA: DIPLOMATIC RELATIONS

Mr COLEMAN:
REID, NEW SOUTH WALES

asked the Prime Minister, upon notice -

What are the diplomatic and /or political relations, if any, at present existingbetween Great Britain and Russia?

Mr BRUCE:
NAT

– On the recognition de jure of the Union of Socialist Soviet Republics by the British Government on the 1st February, 1924, diplomatic relations were established between the two countries by the British Government appointing a Charge d’ A ff aires in Moscow, and by the Soviet Government appointing a representative of similar status in London.

page 4207

QUESTION

SUGAR

distribution in western australia.

Mr A GREEN:
KALGOORLIE, WESTERN AUSTRALIA · ALP; FLP from 1931; ALP from 1936

asked the Prime Minister, upon notice-

  1. ls it a fact, as stated, that, for the purposes of the wholesale distribution of sugar in Western Australia, Perth has been considered as a capital and placed on the same equality of price as the other capital bases of. distribution through the Commonwealth?
  2. Is it a fact that the retailers of Perth have been said to be charging more than the stipulated retail price of 41/2d. per lb., and, if the facts are as stated in question No.1, are the retailers keeping to the spirit of the arrangement that 41/2d. perlb. should be charged to the consumer?
  3. If Perth has not been determined as a capital centre for distribution purposes, why has discrimination been made, as compared with the arrangement for other capitals?
Mr BRUCE:
NAT

– The answers to the honorable member’s questions are as follow : -

  1. Yes.
  2. Retailers in Perth have been charging the public 5d. perlb. for sugar as against the stipulated price of 41/2d. perlb. which obtains in the capital cities of all States except Western Australia. Perth retailers are not, therefore, keeping to the spirit of the arrangement bywhich the Sugar Board pays all freights from the refinery to Western Australia (amounting to approximately £30,000 per annum), so as to enable grocers in Perth and Fremantle to retail sugar at 41/2d perlb. and still receive the same gross profit as grocers in the eastern States.
  3. Perth, and also Fremantle, were determined as capital centres some time ago for the purpose of distributing sugar - at the particular request of retail grocers in those cities - so that grocers in Perth and Fremantle, by receiving sugar at exactly the same price charged to grocers in the capital cities of eastern States, should be enabled to sell such sugar to the public at the lower rates charged in the eastern States. Despite the payment by the Sugar Board, necessary to reduce the wholesale price in Western Australia to the wholesale price in eastern States, of freights amounting to approximately £30,000 per annum, grocers in Perth and Fremantle have retained their substantial concession, and’ the public have not derived the benefits for which the concession was solely granted. After several months’ negotiations with the Grocers’ Association of Western Australia, the association refused to sell sugar to the public at the stipulated price of 41/2d. perlb. for cash, and the Commonwealth accordingly could no longer withhold objection to the proposal of the Queensland Sugar Board to withdraw the freight concessions. These concessions were withdrawn as from the 1st July,1926, and from that date Perth and Fremantle ceased to be regarded as capital cities for the purpose of distributing sugar. The Western Australian Grocers’ Association has been informed that the concessions will be immediately reinstated if grocers in Perth and Fremantle agree to sell sugar at 41/2d. perlb. for cash, as is done in other capital cities.

page 4208

QUESTION

TREATIES AND CONVENTIONS

Mr COLEMAN:

asked the Prime Minister, upon notice -

  1. What procedure is followed in the ratification by the Government of various treaties and conventions?
  2. Is Australia committed by the treaties negotiated by Great Britain which have not been approved and/or signed by Australia?
Mr BRUCE:
NAT

– The answers to the honorable member’s questions are as follow : -

  1. The practice followed in the Commonwealth in respect to the ratification of treaties is that adopted by the 1923 Imperial Conference, as follows: -

    1. The ratification of treaties imposing obligations on one part of the Empire is effected at the instance of the government of that part;
    2. The ratilication of treaties imposing obligations on more than one part of the Empireis effected after consultation between the governments of those parts of the Empire concerned. It is for each government to decide whether parliamentary approval, or legislation, is required before desire for, or concurrence in, ratification is intimated by that Government.

The procedure in respect to treaties is for the Governor-General, on the advice of the Executive Council, to move His Majesty the King to effect ratification in respect of the Commonwealth. Certain international conventions of an administrative or technical character are not subject to this procedure of ratification, but are confirmed and approved by the GovernorGeneral, on the advice of the Federal Executive Council.

  1. This question deals with the constitutional relationships between Great Britain and the self-governing parts of the Empire, and cannot be appropriately dealt with in reply to a question.

page 4208

QUESTION

MEREWETHER POST OFFICE

Mr WATKINS:
NEWCASTLE, NEW SOUTH WALES

asked the Minister for Works and Railways, upon notice -

What steps have been taken by his department to erect the new post office at Merewether; New South Wales, for which money has been provided ?

Mr HILL:
Minister for Works and Railways · ECHUCA, VICTORIA · CP

– It is expected that tenders will be invited by the end of the present month.

page 4208

QUESTION

NEW GUINEA

Sale of Expropriated Properties - Mrs. Flora Gilmore

Mr R GREEN:
RICHMOND, NEW SOUTH WALES · CP

asked the Treasurer, upon notice -

  1. What are the names and addresses of the individuals or companies who were the successful tenderers for the recent purchase of expropriated property in the Mandated Territory of New Guinea?
  2. What are the names of the properties acquired, and what is the amount of the. accepted tenders for such properties?
  3. What was the upset price of each of the properties sold?
Dr EARLE PAGE:
CP

– The following statement, in the form, of a. return, gives the information desired by the honorable member : -

Mr.R. GREEN asked the Treasurer, upon notice -

  1. Does Mrs. Flora Gilmore, of Kokopo, occupy any official position with the Expropriation Board?
  2. If not, why does this lady sign official documents and correspondence between the board and its officers?
Dr EARLE PAGE:

– The information is being obtained, and will be furnished within the next few days.

page 4211

QUESTION

BOUNTIES

Wine - Wire - Wire Netting - sulphur.

Mr GREGORY:
SWAN, WESTERN AUSTRALIA

asked the Treasurer, upon notice -

  1. Whether he will supply particulars of the expenditure of £217,109 bounty on the export of wine, showing to what companies, firms or persons the bounty was paid, and the amount in each case?
  2. What was the amount of the bounty paid on wire produced in Australia?
  3. What was the amount paid on the production of wire netting?
  4. What was the amount paid by bounty on the production of sulphur, and to whom was it paid?
Dr EARLE PAGE:
CP

– The answers to the honorable member’s questions are as follows : -

  1. South Australia - Angoves Ltd., Renmark, £12,119 5s.1d.; Buring & Sobels, Adelaide, £3,515 8s.; Dyard & Good, Reynells, £6,799 4s.; Cleland & Sons Ltd., Adelaide, £713 8s.; Cramp & Sons Ltd., Rowlands Flat, £5,639 4s.; F. Hamilton Estate, Glenelg, £5,28210s. 9d.; Hardy & Sons Ltd., Adelaide, £4,21712s.; Lindeman Ltd., Adelaide, £3,39716s.; Lyall, D. A., St. Andrews, £14 8s. ; Martin & SonLtd.,

Burnside, £5,352 2s. 3d.; Penfolds Wines Ltd., Adelaide, £2,157 2s. 6d.; Reynell & Sons Ltd., Reynella, £ 4,588; Robertson, J. H., O’Halloran Hill, £499 18s.; Salter & Sons Ltd., St. Peters, £11,558 14s.; Seppelt 4 Sons Ltd., Seppeltsfield, £2,856 15s. 7d.-, Smith & Sons Ltd., Angaston, £12,100 3s. 10d.; Stanley Wine Co., Clare, £15,895 18s.; Tolley, Scott & Tolley Ltd., St. Peters, £4,864 12s.; Walker, R. C. H., Ltd., Adelaide, £34,925 8s. Total, £136,497 10s.

New South Wales. - -Caldwells Wines Ltd., Sydney, 17s. 4d.; Lindeman Ltd., Sydney, £22,033 18s. 3d.; Penfolds Wines Ltd., Sydney, £10^555 3s. 3d. ; Victorian Associated Vineyards, Sydney, £2 8s. Total £32,608 13s. 6d.

Victoria. - Alexander & Patterson, Melbourne, £1,397 18s.; Bests Great Western Wines Pty. Ltd., Melbourne, £62 12s.; Burgoyne & Co. Ltd., Rutherglen, £57 ; Cohn Bros., Melbourne, £98 10s.; Cullen, A. F., Ruther- glen, £17,781 13s. 7d.; Darveniza, T., & Co., Mooroopna, £44 9s. 7d.; Eckhoof, A., Barnawartha, £100; Graham Bros., Rutherglen, £3,658 18s.; Kurrle, O., Melbourne, £23; Lindeman Ltd., Melbourne, £4,997 12s. 4d.; Masterton & Dobbin, Wahgunyah, £5,494 4s. 4d.-; Penfolds Wines Ltd., Melbourne, £34 16s.; Romalo Pty. Ltd., Melbourne, £376 10s.; Rutherglen Estates Pty. Ltd., Rutherglen, £5,286 10s. 4d.; Seabrook & Sons, Melbourne, £2,323 18s.; Seppelt & Sons Ltd., Melbourne, £4,443 2s.; Smith, G., & Sons, Wahgunyah, £1,821 16s. Total, £48,002 10s. 2d. Total bounty paid, £217,108 13s. 8d.

  1. From 18th October, 1922, to 14th July, 1926- £247,096 17s. 2d.
  2. From 18th October, 1922, to 14th July, 1926-£287,971 19s. 8d.
  3. From 1st September, 1923, to 30th June, 1926 - Australian Fertilizers Pty. Ltd., £7,272 17s.; Electrolytic Zinc Co. of Australia Ltd., £85,479 4s. 8d.; Mr Lyell Chemical Works, £2,318 16s. 9d. Total, £95,070 18s. 5d.

page 4212

QUESTION

POSTAGE STAMPS: NEW DESIGNS

Mr A GREEN:
KALGOORLIE, WESTERN AUSTRALIA · ALP; FLP from 1931; ALP from 1936

asked the PostmasterGeneral, upon notice -

  1. What are the reasons of the PostmasterGeneral against the issue of a new and more artistic series of postage stamps than those at present in use?
  2. Is it a fact that the present printing equipment could produce a high class of surfaceprinted stamps if designs of a less crowded character were designed; and that the present equipment could produce all requirements of engraved stamps from ls. upwards?
  3. Can plates suitable for a very high grade of surface-printed work be procured from Waterlow, London, always providing that the design itself is satisfactory?
  4. Is he prepared to consult the stamp printer, Mr. Mullett, as to the practicability of printing a series of the character indicated, with) a view to issuing a presentable series of Commonwealth stamps at an early date?
Mr GIBSON:
Postmaster-General · CORANGAMITE, VICTORIA · CP

– The answers to the honorable member’s questions are as follow :- 1 and 2. A’ decision has not been reached on the question of issuing a new series of stamps and the suitability of the existing equipment for the purpose.

  1. Yes.
  2. The printer will ‘be consulted before a decision is arrived at.

page 4212

QUESTION

HARBOURS AND RIVERS

Report bt Sm George Buchanan.

Mr C RILEY:
COOK, NEW SOUTH WALES · ALP; FLP from 1931

asked the Prime Minister, upon notice -

Whether the report of Sir George Buchanan on the Harbours and Rivers of the Commonwealth has yet been received; and, if so,’ is it proposed to print the report and make it available to honorable members?

Mr BRUCE:
NAT

– A report on ports of North and North-west Australia has recently been received from Sir George Buchanan, and will be made available ii a few days. The preparation by Sir George Buchanan of his general report On Australian harbours has been delayed through illness. That report is, however, expected shortly, and will also be made available to honorable members.

page 4212

QUESTION

DISEASED POTATOES FROM NEW ZEALAND

Corky Scab

Sir NEVILLE HOWSE:
Minister for Defence · CALARE, NEW SOUTH WALES · NAT

– On 30th June the honorable member for Ballarat (Mr. McGrath) asked the following questions : -

  1. Since 1st January, 1926, how many tons of New Zealand potatoes have been condemned at Melbourne, Sydney, Brisbane, and Adelaide, because of a disease known as corky scab?
  2. What action does the Government intend to take to prevent such a disease being introduced into Australia?
  3. How many tons of New Zealand potatoes have been imported into Australia since 1st January, 1926,- and what are the names of the importers ?
  4. How many tons of Australian potatoes were exported to New Zealand in 1923, 1924, and 1925?

Some information was given by me on that date in reply to question 1, and an answer was given to question 2. I am now in a position to furnish the following answers to questions 1, 3, and 4, concerning which I informed the’ honorable member that information was being obtained from the other States, which would take an appreciable time to collect: -

  1. 174 bags. (approximately 21 tons), at Melbourne.
  2. 67,740 bags (approximately 5,606 tons), imported at Sydney and Brisbane. The names of the importers are as follows: - Sydney. - Walker and Oxby, Cameron and McFadyen,R. Robinson and Co., T. McHugh Ltd., J. Jones and Co., Crocker and Barrett Ltd., H. Dean and Son, Ltd., Foley Bros., Stockman and Co. Ltd., Kerridge and McMahon, N.S.W. Produce Co. Ltd., Thos. Williams, Goulburn, J. Dingle and Co. Ltd., G. E. Bryant and Son, Ltd., Davis and Son, Pty. Ltd., Tasmanian Producers and Distributing Agency, Ltd., C. P. Browne, J. M. Scott and Co. Ltd., J. McFarland, Roy J. Brown, Frazer Uther and Co. Brisbane. - J. P. Cranley, C. Risson, J. Jackson and Co., Barnes and Co., Henry Dean, Samuel Allen and Co., W. A. Forth, Denhams Ltd.
  3. 1923, 3cwt. ( from Melbourne ) ; 1924, 1,833 tons (1,829 from Melbourne, and 4 from Sydney); 1925, 4,026 tons (from Melbourne).

page 4213

QUESTION

AERODROME AT ROCKHAMPTON

Mr FORDE:
CAPRICORNIA, QUEENSLAND

asked the Minister for Defence, upon notice -

  1. What is the present position of the proposal to establish an aerodrome at Rockhampton?
  2. If the proposal hasbeen turned down, will the Minister have the whole question reconsidered in view of the great progress made in aviation in the last twelve months.
Sir NEVILLE HOWSE:
NAT

– The answers to the honorable member’s questions are -

  1. A suitable area has been located and an estimate obtained as to the cost involved in acquiring and preparing it for the purpose.
  2. The proposal has not been turned down but it has been deferred for reconsideration when the volume of aerial traffic in the neighbourhood of Rockhampton is such as to justify the considerable expenditure that would be involved in the provision of a Government aerodrome at that centre.

page 4213

QUESTION

COTTON INDUSTRY

Mr PRATTEN:
MARTIN, NEW SOUTH WALES · NAT

– On the 14th July the honorable member for Capricornia (Mr. Forde) asked the following questions : -

  1. What was the value of raw cotton exported from Australia for the years ending 30th June, 1922, 1923, 1924, and 1925?
  2. What amount has the Federal Government paid each year towards the guaranteed price on seed cotton since 1920, up to 30th June, 1926?
  3. What bounties have been paid by the Federal Government since 1st January, 1917, and what is the total amount paid under each act?
  4. What was the total sum spent by the Federal Government in assisting and handling Australian dried fruits?
  5. What is the present price of American middling cotton lint on the Liverpool market?
  6. What is the rate of wages paid to cottonpickers in the United States of America?

I am now able to furnish the honorable member with the following information : -

  1. 1921-22, £64,250; 1922-23, £202,059; 1923-24, £266,943; 1924-25, £383,899.
  2. Year ended 30th June, 1920, nil;year ended 30th June, 1921, nil; year ended 30th June, 1922, nil; year ended 30th June, 1923, nil; year ended 30th June, 1924, £46,213 16s. 5d.; year ended 30th June, 1925 (approximately), £55,000; year ended 30th June, 1926, no figures available as cotton not sold yet.
  3. Iron and Steel Bounty Act, No. 36, of 1918, £11,178; Iron and Steel Products Bounty Act, No. 29,of 1922,£ 677,732 7s.11d.; Shale Oil Bounty Act 1917-1922, £125,491 14s. 3d.; Meat Export Bounties, No. 11, of 1922, £123,1601s. 4d.; Meat Export Bounties, No. 4, of 1923, £141,572 0s.1d.; Sulphur Bounty Act, No. 21, of 1923; £95,070 18s. 5d.; Canned Fruits Bounty Act, No. 2, of 1924, £129,191 11s. 8d.; Cattle Export Bounty Act, No.14, of 1924, £4,910; Wine Export Bounty Act, No. 23, of1924, £247,353 15s. 8d. ; total amount of bounties paid since 1st January, 1917, £1,555,660 9s. 4d.
  4. Advances amounting to £199,243 were made to the growers of dried fruits to assist in the production of the 1925 crop. These advances are repayable to the Commonwealth, except in those cases where, on the recommendation of theboard appointed under the Dried Fruit Advances Act, it is decided to exempt the growers from repayment.
  5. No normal quotations are available at present, pending a reliable estimate of the incoming American crop.
  6. The rate varies from3/4d. to1d. per lb., but the average quantity picked per day in the United States is very considerably more than the quantity picked per day in Queensland.

page 4213

QUESTION

BUDGET, 1926-27

In Committee of Supply: Considera tion resumed from 8th July (vide page 3955), on motion by Dr. Earle Page -

That the first item in the Estimates under Division I.- The Parliament- namely, “ The President, £1,300,” be agreed to.

Mr SCULLIN:
Yarra

.- The budget speech of the Treasurer is undoubtedly the earliest budget speech on record in this Parliament. I commend the honorable gentleman and the officers of his department for the speed at which they did the work, but I would point out that, although they have established a record, there is no virtue in having the speech delivered eight days after the close of the financial year if it is not a complete financial statement. Honorable members will find considerable difficulty in discussing this budget owing to the scarcity of information in the budget papers; much of the information contained in previous statements is missing from this one. The preliminary issue of budget papers covers about twenty pages, but in previous years the budget papers have covered about 220 pages. I have taken considerable trouble in endeavouring to obtain up-to-date information, but on a number of subjects I have not succeeded. Although last year’s budget speech was delivered in August, it was not discussed in this, committee until six months afterwards, when we were approaching the end of the financial year, and there had been an election in the meantime. There is no need for haste this year, if haste means that honorable members must be deprived of valuable information. The Treasurer, boasting of presenting his budget statement early, is like the schoolboy who never properly learned his lessons, but boasted that he was always first at school. One of the subjects about which complete information is not furnished is the Customs and excise revenue. It is important for honorable members that those two items should be separated, but they are not separated in the budget statement. I have been able to obtain the details I need in regard to these items from the Treasury Department. Information is also lacking as to details of the land tax and income tax, and the amount of taxation outstanding. That information has previously been contained in the budget papers. Other information that is not provided is details of the expenditure of each department, details of expenditure from loan funds, interest on sinking fund payments, details of the total cost of each department, details of the cost of additions, mew works and buildings, and statements of loan appropriations and flotations. To be effective, the debate on the budget should be directed to two main questions - how has the revenue been raised, and how has the money been expended’?’ The power to tax, and the ability of the people to pay taxation, are the basis of national credit; but taxation must be designed to encourage rather than discourage production. .Further, the wise expenditure of the money raised has an important bearing on the prosperity of the country and the maintenance of the national credit. By “wise expenditure,” I do not necessarily mean cheese-paring, but the spending of money in a wise way. I wish to discuss the budget from those points of view, and there are a few facts I wish to cite as a foundation for my arguments.

I find in the budget that the taxation, direct and indirect, has increased every year since the Treasurer took office. He, of all men, was heralded as a Treasurer who would enforce economy. I well remember his severe criticism of the Prime Minister when that right honorable gentleman was Treasurer. One obtains the impression, when listening to the budget speech, and ‘ particularly when reading the political speeches at the last election, that the Treasurer has reduced -expenditure and taxation. Let me examine the facts. The direct and indirect taxation since 1922-23 has been-

Those figures include the amounts raised for the States, and they show that the total direct and indirect taxation has increased year by year during the Treasurer’s term of office.

Mr Watt:

– The conversion loans, of course, increase the interest bill.

Mr SCULLIN:

– That is true. The Treasurer has stated that the income tax payments have been reduced since 1921-22 by 47 per cent, per head, but that is only one item of taxation. Under the heading of taxation we must include the total of all direct and indirect taxation. When we do that the figures are -

During his first year of office the Treasurer reduced the total taxation per head by 2d., and the next year he increased it by 3s. The. details for last year are not available, because of the inadequate information provided in the budget. This is. the fourth budget .presented by the Treasurer, and I shall state the revenue receipts for the four years during which he has held office. The revenue raised from taxation and services other than business undertakings and Territories has been -

The total revenue from services, business undertakings, and Territories has been -

The revenue has, therefore, increased from the 30th June, 1923, to the 30th June, 1926, by £6,365,755. That increase is due largely to the excessive importations into this country.

Mr Watt:

– The old surpluses that he took over have mostly disappeared.

Mr SCULLIN:

– That is so. I wish to contrast the Treasurer’s estimate of Customs receipts with the actual receipts during his four years of office. The following are the figures: -

Mr Watt:

– Is the honorable member omitting the excise figures?

Mr SCULLIN:

– Yes. I am taking the Customs duties only. The estimate of Customs receipts for 1926-27 is £29,208,000. That, of course, includes the proposed tax on petrol, chassis, and tires amounting to £1,500,000. It will be seen that each year since June, 1923, the Customs receipts have greatly exceeded the estimates, and that, notwithstanding the tariff, they- are becoming greater each year. In 1922, when the present Prime Minister was Treasurer, there was no stronger critic of his administration than the present Treasurer. In a speech delivered in this House on the 12th October, 1922, he said-

The increase in Customs revenue is not a matter of which the Treasurer should he proud. It should rather cause him to go into sackcloth, and place ashes upon his head.

If the then Treasurer should have gone into sackcloth and placed ashes on his head for receiving a Customs revenue of £17,000,000, the present Treasurer, who made that scathing indictment, having received for the last year. £27,000,000 in Customs revenue, should put not ashes but coals of fire on his head. Turning to the summary of Customs receipts for the four years that the Treasurer has been in office, and the summary of the four years preceding that - I am still excluding exciseI find that from 1918-19 to 1921-22, inclusive, the total receipts from Customs were £64,370,000, whereas from 1922-23 to 1925-26 they were £102,020,000.

Mr Watt:

– Why not include excise?

Mr SCULLIN:

– I am dealing with the revenue due to importations. The variation in excise has not been very great. I shall show later that the increase in Customs revenue, whilst swelling the sur-. pluses, has been seriously damaging the industries of this country.

Mr Prowse:

– Why did the honorable member vote for the tariff ?

Mr SCULLIN:

– If honorable members in the corner had helped the Labour party to obtain a better tariff, there would have been less revenue and more’ production. Whilst £64,370,000 was received in Customs revenue for the four years before the present Treasurer took office, yet, during his administration the receipts have increased to £102,020,000. During his four years of office he has been rolling in riches, with an increase of more than £38,000,000 in Customs duties. The following table shows how the expenditure from revenue has been handled by the so-called economy Treasurer : -

The expenditure from revenue increased from the 30th June, 1923, to the 30th June, 1926, by £9,192,000.

Dr Earle Page:

– Those figures, of course, include the naval construction programme.

Mr SCULLIN:

– They include the whole of the expenditure from revenue, excluding payments to the States. The loan expenditure for 1922-23 was £7 J46.000 ; for 1923-24, £8,472,000 ; for 1924-25, £7,317,000; and for 1925-26, £7,998,000.’ The loan expenditure has increased from 1922-23 to 1925-26 by over £800,000. The estimate for 1926-27 is £10,000,000, but to that must be added £2,000,000 for the Federal Capital

Commission. Since 1922-23 the increase of loan expenditure has been approximately £5,000,000.

Mr RODGERS:
WANNON, VICTORIA · LP; NAT from 1917

– It is the loan money that is affecting our industries.

Mr SCULLIN:

– Iwish now to deal with the national debt. It would be unfair to the Treasurer to quote the gross debt, and I, therefore, shall deal only with the net debt. In 1922-23, it was £335,371,000; in 1923-24, £335,123,000; in 1924-25, £336,196,000, and in 1925- 26, £338,841,000. The net national debt has, therefore, increased for those years by £3,470,000. In addition, the Commonwealth proposes to raise loans of £34,000,000 for migration spread over ten years, and of £20,000,000 for housing, which was one of the placards displayed in the Government’sshop window at the last election. Whilst money is placed into a sinking fund,of which there is much boasting on the part of the Treasurer, the bulk of it being taken from the profits of the Commonwealth Bank and the note issue, which institutions were established by a Labour go- vernment against strong opposition, the national debt is still increasing. In those circumstances, I cannot see how the Treasurer can rightly boast about the sinking fund.

Turning toconversion loans, whichwere mentionedby the right honorable member for Balaclava (Mr, Watt), I would point out to the House that there is aserious positionfacing us respectingthem. There will be £46,600,000 maturingon the 15th December, 1927; for whichwe are paying 41/2 per cent., and £21,200,000 at5 per cent., the balance being at 6 per cent. Assuming that that money can be obtained for51/2 per cent. in 1927, we shall have to pay an extra 1 per cent. to convert the £46,600,000 and an extra1/2 percent. to convert the £21,200,000, making an additional burden of over half a million per annum.

Mr Watt:

– I do not think the Treasurer will accept the estimate of 51/2 per cent. for 1927.

Dr Earle Page:

– We are only paying 53/4 per cent. now.

Mr SCULLIN:

– I think my estimate will be found to be fairly correct. This continual overseas borrowing has meant that the Australian market has been flooded with overseas products. I am adopting this line of argument, let me say, not for the mere purpose of criticizing the budget, nor to decry Australia, for I have absolute and unbounded faith in the future of this country. I do not care what Government may be in office, I think the country has such vast possibilities that its credit will remain sound. But as responsible men we should study the position into which we are drifting. The following table, showing the value of our imports and exports for the last four years, is enlightening: -

It will be seen, therefore, that while the excess of imports over exports in 1922-23 and 1923-24was £13,887,688 and £21,131,129, respectively, we recovered our ground in 1924-25,when we had an excess of exports to the value of £4,008,646. But, unfortunately, we lost ground again last year to theextent of £2,654,000. I wish now to compare the total increasedvalue of our imports with the total amount of loan money that wehaveraised abroad, toshow how closelytheone approximates to the other. The figures amply bear out the well-known truism that borrowing abroad simply means importing goods.

Mr Watt:

– We must import goods or gold; and we have imported £10,000,000 worth of gold recently.

Dr Earle Page:

– That would be included in the import figures.

Mr SCULLIN:

-We have both imported and exported gold recently, and I do not know what the position is at present. It would be interesting if the Treasurer wouldexplain it to us.From 1922 to 1926 we borrowed approximately £50,000,000 abroad, and the increase in our imports in the same period was approximately £55,000,000. That is an interesting contrast. In the year ended the 30th June, 1922, the imports into Australia were valued atapproximately £100,000,000 ; and in the year ended the 30th June, 1925, which is the last one for which complete figures areavailable, our imports were valued at £157,097,000, so that they increased by approximately £57,000,000 in the three years. Those figures spell, not prosperity, but the very opposite. The state of affairs brought about by our huge importations is regrettable. Many of our factories have either closed or are working only half time. While we are paying toll to the foreigners by importing their goods, we are paying doles to our own unemployed. The new tariff will undoubtedly relieve the situation, to a large extent, but it will not remove all the pressure. It is regrettable that its introduction was delayed for so long. We talked about it for years before it was actually introduced, and while we were talking our production steadily decreased, and the number of unemployed steadily increased, until conditions generally became such as should not obtain in a country like this.

While we were importing goods we were also bringing migrants here. In my opinion that is an insane procedure. We discussed the broad question of immigration when the Development and Migration Bill was before us, and I do not propose to say much on it just now, but I invite the attention of honorable members to a few figures to illustrate the financialeffect that the new migration agreement will have. According to a cable message published in the press on the 2nd July last, the Under Treasurer of State for the Colonies pointed out that Under the old scheme it cost Britain for migration (as far as Australia was concerned) £580,836 in connexion with 25,596 migrants for the yearended the 31st March last. In other words, it cost Britain £22 13s. per migrant. Under the new agreement Australia is to receive 450,000 migrants in ten years, and the maximum cost to Britain is to be £7,083,000. In other words, each migrant is to cost Britain £15 14s., or about £7 less than under the old arrangement, in addition to which Britain will be relieved of unemployment payments to the extent of about £50 per annum for every migrant. The statement furnished to us on the 1st July of this year by the Minister for Markets and Migration gave some interesting figures, from which I have abstracted the following table : -

It will be seen, therefore, that the average expenditure for the three years was £323,333, the average number of migrants introduced 25,502, the average cost to Australia being £1210s. per migrant. Under the new agreement a total amount of £34,000,000 is. to be spent in ten years, to introduce 450,000 persons. The expenditure per annum will thus average £3,400,000 for 45,000 persons. Under paragraph 5 of the agreement Great Britain will contribute £130,000 for every £750,000 spent, so that on an expenditure of £3,400,000 a year she will contribute £589,333, leaving Australia to find the remaining £2,810,667. In addition, Australia will have to pay 4 per cent. on the £3,400,000 each year, so that the cost for the first year under that heading will be £136,000, and it will increase every year afterwards. At the end of ten years Australia will have to pay the full rate of interest on the money borrowed. It is clear that, under the new agreement, Great Britain will be much better off, and that Australia will have to meet a considerably increased expenditure.

Mr Bruce:

– Butthe honorable member has not explained that Australia will retain the assets created by the expenditure of the money.

Mr SCULLIN:

– We shall be expending this money for the settlement of each migrant at three times the rate provided under the terms ofthe agreement.

Mr Bruce:

– That is not so.

Mr SCULLIN:

-For the £34,000,000 borrowed abroad we shall have £34,000,000 worth ofgoodsadded to our flood of imports, and that will bedetrimental, rather than beneficial, to the industries of Australia.

Mr Watt:

– Is not that increased expenditure per head explained by the fact that under the new agreement migrants will be settled on the land, whereas they were not so settled under the old system?

Mr SCULLIN:

– It will be found that only a small percentage of the migrants can be settled on the land, because, if you divide. £34,000,000 by 450,000, there is less than £80 per head available for that purpose. The sum of £1,000 provided under the agreement for each settler who goes on the land will not be sufficient.

Dr Earle Page:

– The more settlers we place on the land, the better it will be for industries.

Mr SCULLIN:

– In the estimates of expenditure for new works out of loan funds, there is an amount of £348,380 for passage money and landing and medical fees of assisted migrants. Can this be fairly described as expenditure on new works ? I submit that the country is being misled. It may look well for the Government to say that it is spending so much on new works, which will be additions to the permanent assets of the country; but it is unsound finance, in my judgment, to spend borrowed money for paying the passages of assisted migrants.

Let us take a brief survey of the financial position. The total expenditure from revenue and from loans from 1922-23 to 1925-26 was as follows :-

The estimated expenditure from revenue and loan funds for 1926-27 is £73.980,830. The . expenditure has increased from 1922-23 to 1925-26 by £10,045,083; and it is now estimated that £1,660,420 more will be spent this year than last year. A survey of the finances of the nation shows that the position is not very encouraging. Our interest bill abroad for Federal debts alone - I am leaving out of consideration the State debts - is approximately 8,000,000 per annum. The total value of imports in excess of exports for the four years from 1922-23 to’1925-26 was £33,500,000, and the excess of exports required to balance the interest would be, say, £32,000,000. A debtor nation must export more than it imports in order to balance its finances, and Australia is in the position of having imported more than it has exported.

Mr Watt:

– The position will be found all the worse if the. honorable member also takes into consideration the figures relating to the States.

Mr SCULLIN:

– Yes ; but I am confining my attention to the Federal figures. We balanced that £65,500;000 by borrowing from abroad. From 1922 to 1926 we borrowed approximately £60,000,000. We should have provided about £32,000.000 for interest in those four .years; and for that purpose we should have had an excess of exports over imports, but the position was reversed.

To make up the shortage of £65,500,000 the Government went abroad to borrow another £60,000,000 ! If we take the State loans and interest, it will probably be found that a similar position obtains regarding them. I have given, as briefly as I could, a general review of this phase of the budget.

I turn now to the subject of the financial relations between the Commonwealth and the States. This has been raised as one of the burning issues of the present time. As the Customs revenue nas mounted higher and higher, giving the Treasurer surplus after surplus, there has naturally been a demand for reduced direct taxation, notably of income taxation. The Government proposes a rearrangement between the Commonwealth and the States, enabling it to say, “We are going to reduce direct taxation by over £7,000,000, practically without any loss of revenue to the Commonwealth.” The Government hopes to bo in the happy ‘position, when presenting the next budget, of being able to show that it has reduced direct taxation by so many millions. This will have been done, of course, only by cutting off the per capita grants to the States. Action in that matter has been postponed as the result of widespread criticism. When the Treasurer introduced the Surplus Revenue Bill I asked him, by way of interjection, whether he thought that it was fair to rush the proposal, good or bad, through the House, expecting the States to rearrange their finances within a few weeks. At that time he said he thought that it was fair; but he has changed his opinion since then.

Dr Earle Page:

– I said then that the Government was quite prepared to collect the money for the States by way of taxation.

Mr SCULLIN:

– But the Minister was not prepared then, as he is now, to postpone action for twelve months. To say that the Government will stop the per capita payments and collect, on behalf of the States, the land tax, the estate duties, and the entertainments tax is mere makebelieve.

Dr Earle Page:

– Not at all; because the States will get the arrears.

Mr SCULLIN:

– The Government will give the States approximately the same amount in cash as it paid to them previously. “Whether the moneys are described as per Capita payments from Customs and excise revenue, or are called land tax, estate duty, and entertainments tax, the fact remains that there is a lot of make-believe about the matter. The Treasurer could have reached exactly the same position by telling the State Governments that he would pay them so much during the ensuing twelve months, and would give them notice that at the end of the year the per capita payments would cease. But that would have been a backdown, and the honorable gentleman is camouflaging his backdown, at least for this financial year. The desirability of preventing the duplication of taxation is a thing about which all honorable members agree. The delimitation of the spheres of taxation is also a desirable end; but it is not everything in itself. After all, the only real evil associated with duplicate taxation is the extra cost involved and the. extra inconvenience to the taxpayers. If we could eliminate or reduce the inconvenience tothe taxpayers and minimize the wastefulness due to the operation of a duplicate system we should achieve the same result whether we delimited the spheres of taxation or not. There is no big principle involved, and certainly none which would justify the rendering of the condition of the finances of the States chaotic. The Treasurer said -

The authority which expends money should have the responsibility for raising it.

Mr Gregory:

– What about the main roads grant?

Mr SCULLIN:

– I am coming to that. Speaking generally, the Treasurer’s statement I have quoted is sound, but I point out that under the new arrangement proposed, the duplication to which he takes exception continues. The honorable gentleman also said -

The States should be financially independent of the Commonwealth.

I submit that the States cannot become financially independent of the Commonwealth. It is impossible that they should do so. The Treasurer himself admits that, in what he proposes. I have before me the figures showing the amount the honorable gentleman is going to raise from land tax, income tax, entertainments tax, and estate tax, which he is proposing to hand to the’ States, and’ to .make up the difference between that amount and ‘the amount of the per capita grant he proposes a special grant of £600,000. Where is the independence of the States if the payments to be made to them out of taxation must be supplemented by special grants ? Then there are special grants to be paid to Western Australia and Tasmania, because of special circumstances, and amounting to £828,000. There is no independence of the States there. I submit that any loss made by a partner in the Federation must be repaired, and we cannot have State financial independence. The worst feature of the honorable gentleman’s scheme is the .proposal that the Commonwealth shall engage in road-making, which is essentially a State function. For this purpose he proposes a grant of £20,000,000 extended over ten years’ and so links the Commonwealth up with a State activity and function for the next ten years at least. It is most anomalous that at the time when the Government is. saying that it wishes to delimit the spheres of taxation of State and Commonwealth, and to separate the Commonwealth finances from the States’, it should come down with a new scheme to link them together in the carrying out of work which for the last 25 years has been regarded as essentially a State responsibility.

Mr Gregory:

– And the States are given no guarantee.

Mr SCULLIN:

-No. This proposal to grant £20,000,000 to make roads in the different States was no doubt soothing to the ears of the people, especially in the back country, at the last election. It was one of the proposals of the Government that was placarded throughout Australia. It was one of the finest and most brightly labelled goods in the Government’s political shop window - £20,000,000 for main roads ! Yet the Prime Minister said in his policy speech that, unlike other Prime Ministers, he made no lavish promises of millions. The right honorable gentleman promised more millions than were promised by any other Prime Minister. One thing he did not tell the people in his policy speech was how he was going to raise the money.

Dr Earle Page:

– Yes, he said it would be raised through the Customs.

Mr SCULLIN:

– Yes, but the right honorable gentleman did not come down with “ the specific financial scheme which the Government has submitted to-day. I think that I am entitled to ask whether the tax on petrol, which it is estimated will produce nearly £1,000,000, is a protective duty to encourage a local industry. If sp, it should have been included in the tariff schedule. It should have been discussed as a tariff proposal for the encouragement of Australian industries. As such it would have been discussed as a legitimate Or illegitimate proposal for the encouragement of Australian industries. If it could have been shown to me that the extra tax on petrol is required to assist .an industry, I, who am 100 per cent, a protectionist, would have been prepared to give it serious consideration.

Mr RODGERS:
WANNON, VICTORIA · LP; NAT from 1917

– I think the honorable member is over-proof as a protectionist.

Mr SCULLIN:

– Yes, 101 per cent, protectionist, if the honorable member pleases. I want to tell the Government that there is going to be no camouflage in this matter by calling a special revenueraising duty a protectionist duty. The Government’s proposal must be discussed on its merits. The Prime Minister tells me that the proposal was set out in his policy speech. When the shop window Was being dressed for the election, the Government proposed a grant of £20,000,000 for main roads. Every one was to be running a motor car over the boulevards constructed through the bush, but no statement was made that, in order to find the money, special duties of Customs would be levied as a purely revenueproducing expedient. I submit that the duty on petrol should only be imposed on those who use the article for transport. It should hot be imposed on men using tractors oh the lands in the back country, or stationary engines, aeroplanes, or motor boats. Boats which run on our rivers, and aeroplanes which sail through the . air, do not damage our roads. I agree that the people who are smashing up our roads should contribute something to their construction and maintenance. I suggest that in the imposition of the proposed duties, it will be practically impossible for the Federal Government to discriminate, and I am not certain that it has the constitutional power to do so. If honorable members read the opinions of at least some of the justices of the High Court in the Barger case, with regard to limitations of taxation so far as it discriminates between parts of States, and their view that such discrimination must be regarded as unconstitutional, they will find that there is some doubt as to the constitutionality of the Government’s proposal to levy an increased duty of some 400 per cent, on all petrol, whether used to smash up roads or to plough the. lands of this country. The tax is not scientific, and it is for an invasion of a sphere of action that does not belong to the federation. It cannot be scientifically or justly applied. I leave the matter at that stage now, because the Prime Minister to-day promised that the House will be given a full opportunity to discuss the proposed petrol duties.

Turning to the Treasurer’s figures concerning the adjustment of State and Federal finances, honorable members have before them the way in which he proposes the adjustment by the new arrangement. There are two aspects oi these figures which I submit are misleading. I regard that as serious when considering the finances of the Federation and the States. There ought to be ‘no suspicion that the figures supplied are in any way. misleading. I crave the indulgence of honorable members to examine the Treasurer’s figures. He says that under the new proposals’ the gains to the State taxpayers will amount to £1,527,852. He arrives at that figure in this way: Total tax surrendered, £7,787,352; per capita payments to be withdrawn, £7,687,500, making a difference of £99,852 in favour of the States. Then, the adjusting grants for all the States amount to £600,000, making the amount in favour of the States £699,852. Then, the honorable gentleman adds the special assistance to Western Australia and Tasmania, amounting to £828,000, and so reaches his figure of £1,527,852. My first comment on these figures is that the special assistance to Western Australia and Tasmania has nothing in the world to do with the general adjustment between the States and the Commonwealth. These are special grants to meet special disabilities which two of the States suffer, as I believe they do, as a result of their entering the Federation. These two grants, amounting to £828,000, should be set aside entirely, as they have nothing whatever to do with a general scheme of adjustment of the finances between the Commonwealth and the States.

Mr Brennan:

– Those two grants merely bring Western Australia and Tas- . mania into line with the other States.

Mr SCULLIN:

– Yes; that is their purpose. If this course is followed the gains to the taxpayers of the States amount to £699,852, and not to £1,527,852. This is on the assumption that the figures of the Treasurer are correct; but I propose now to show that they are not correct. The honorable gentleman says that the Government is surrendering certain fields of taxation - land tax, estate duty tax, and entertainments tax. The amount credited to land tax surrender is £2,111,000. How does the Treasurer arrive at that sum? He tells us. He says, “I took the average for the three years 1921-2, 1922-3, and 1923-4, not including Grown leasehold tax, because, of course, there was none collected.” The honorable gentleman adds the figures for the three years, divides the total by three, and so gets his average. As there was a disparity in the collection of the tax during the first of these years as compared with the last two, it is impossible for the Treasurer’s average to be correct. The honorable gentleman’s figures for land taxation are -1921-2, £2,284,040; 1922-3, £2,018,000; 1923-4, £2,030,000; total, £6,338,000; average, £2,111,000. The arithmetic is correct so far; but I point out that in 1921-2 the amount collected was £2,284,000, and for the remaining two years the tax yielded only £2,000,000 each year. Why was there a drop of £284,000 between the amount collected in 1921-2 and the amount collected in the subsequent year ?

Mr Watt:

– Is the honorable member using the figures of assessment or collection?

Mr SCULLIN:

– The figures of collection, which are the only reliable figures. The reason for the drop is obvious; it was due to the 20 per cent. cut in the rate.

Dr Earle Page:

– That is actually stated in the budget.

Mr SCULLIN:

– I am pointing out that the Treasurer took the average for three years, and as in one year the rate was 20 per cent. higher than in the others, his average must be wrong.

Dr Earle Page:

– The valuations were steadily going up.

Mr SCULLIN:

– That will not do; the honorable gentleman cannot put that over.

Mr Watt:

– The area of taxation is being reduced.

Mr SCULLIN:

– Yes. Subdivision over a long period of years has counterbalanced the increase in land values, and the amount collected has maintained a fairly regular average. After the end of the financial year 1921-22 the rate of land tax was reduced 20 per cent., and the Government proposes to surrender the land tax on the existing rate, which in the years 1922-23 and 1923-24 yielded £2,000,000 per annum. By including in his average the year in which the rate of tax was 20 per cent. higher than at present, the Treasurer made a miscalculation of £100,000.

Dr Earle Page:

– That is not so. I deny the honorable member’s statement that land values have not increased steadily.

Mr SCULLIN:

– I do not say that land values have not increased, but the subdivisions have kept down the valuation for taxation purposes. Why did not the Treasurer make that point clear in his statement?

Dr Earle Page:

– I did.

Mr Watt:

– It cannot be said that the valuations have increased 20 per cent.

Dr Earle Page:

– In ten years they have increased 20 per cent.

Mr SCULLIN:

– The Treasurer is trying to evade his absolute misrepresentation of the figures. If he says now that the average amount collected will be £2,111,000 per annum because of the increase in land values, why did he not state that frankly in his schedule? What the schedule says is that the estimate of £2,111,000 is based on the average collection during the years 1921-22 to 1923-24.

Dr Earle Page:

-The way in which the amount was actually arrived at is stated plainly in my speech.

Mr SCULLIN:

– But there is no statement that the estimate includes a year in which the rate of tax was 20 per cent. higher than it is now.

Dr Earle Page:

– That is stated in the memorandum.

Mr SCULLIN:

– As to the professed object of the rearrangement of Federal and State finances, even a cursory examination of the Government’s proposals shows that the sphere of taxation will not be delimited, and that duplication and overlapping will not be avoided to any extent. The Government proposes to surrender the estate duty, the entertainments tax, and the land tax. The estate duty should be reduced by increasing the exemptions. Discontinuance of Federal taxation of land values will relieve only the wealthy section of the community; and will deprive the country of the benefits for which the tax was designed. The Prime Minister (Mr. Bruce) has admitted that land taxation differs from other imposts, and cannot be regarded as merely a medium for raising revenue. The land tax introduced by the Fisher Government, and passed by this Parliament, was primarily for the purpose of bursting up large estates. The Commonwealth invaded that field of taxation because of the impossibility of getting an effective land tax sanctioned by the Upper Houses of the State Parliaments. No one has more convincing knowledge of that fact than the honorable member for Balaclava (Mr. Watt). As Treasurer of Victoria ri 1909, he succeeded in carrying through the Legislative Assembly a land tax bill w”hich would have been fairly effective. He fought for that proposal as no one else in this country could have fought for it. I have been a student of land taxation more than of any other phase of politics, and, having read the honorable member’s speech many times, I regard it as the finest text-book on that subject of which I have knowledge. The honorable gentleman possesses ability and fighting force; but, whilst he was successful in the House of which he was leader, he could not get the bill carried in that musty slaughter-house of reforms, the Legislative Council. The Federal Government, in proposing to leave land taxation to the State Parliaments, knows very well that the impost will be transferred from the shoulders of the squatter and land monopolist to those of the struggling farmer. The Labour party, which was responsible for the introduction of the Federal land tax sixteen years ago, will resist every attempt to reduce or repeal it. The proposed re-arrangement of the financial relations of Commonwealth and States will not realize the ideal that the Treasurer enunciated ; but it is an easy way of getting rid of the Federal land tax, which the honorable gentleman has consistently attacked ever since he assumed office.

I propose very briefly to review the Treasurer’s land tax proposals in the last four budgets. They are in the nature of a tragedy in four acts. In 1923, he introduced a bill for the repeal of the tax on Crown leaseholds and the remission of all arrears. Parliament ordered him to collect the arrears; but, in the following year, he reported that only £500 of the outstanding taxes on freehold and leasehold had been gathered into the Treasury. Then followed an attack from this side of the House upon the administration of the Federal land tax, and when a commission sat to inquire into the matter, documents relating thereto were gathered from all parts of Australia. With what result? The accumulated arrears, which the Treasurer had made no attempt to collect between the years 1922 and 1924-

Dr Earle Page:

– The honorable member must recognize that an attempt was made; the commissioner was directed by the Government to collect the tax.

Mr SCULLIN:

– This is the first opportunity I have had to recite to the Treasurer the history of his administration in this regard, and he must listen to it with patience. After a policy of inactivity had failed, and had brought upon the Government severe criticism from this side of the House, the collection of arrears of tax on freehold land and Crown leases in 1924-25 and 1925-26 amounted to £1,000,000. The bill for the repeal of the tax on Crown leaseholds was not carried until August, 1923, and it was made retrospective to 1917. In regard to the arrears, the Treasurer’s budget statement this year is the same old camouflage as he employed in previous years. A few men monopolize 968,000,000 acres; they lease almost half our continent, and yet the Government declares that it is unable to collect any land tax from them. If half of this continent is so controlled by private monopolists, or is so worthless that no tax can be collected upon it, it is time, that the Government .discontinued talking, of filling the country with migrants. In introducing the repeal bill in 3923, the Treasurer said that it was “impossible to collect “ the arrears of land tax, that “the balance outstanding is largely mythical,” and “ the arrears of taxation is largely an illusory sum.” Parliament ordered that the arrears be collected, and £500 was collected in one year. Then I made certain definite charges in this chamber, in answer to which the honorable gentleman said that in ordering the collection of this taxation Parliament had imposed upon the commissioner an impossible task. During the last general election, the Treasurer said, at Warragul, that no previous Government had been able to collect taxation on Crown leaseholds. He must have known that in the three years 1913-14 to 1916-17 £690,000 was collected in respect of Crown leaseholds.

Dr Earle Page:

– I stated that no previous Government had ever collected taxation from Sir Sidney Kidman in respect of Crown leaseholds.

Mr SCULLIN:

– The Treasurer said that no previous Government could collect the tax on Crown leases. When the tax was suspended in 1917 the suspension did not apply to Western Australia or Tasmania. I draw the attention of members representing Western Australia to the fact that the tax on Crown leaseholds was suspended in that State only for the last year of its operation, namely, 1922- 23. For the previous four years it had been suspended in the eastern States, with the exception of Tasmania.

Mr Prowse:

– Western Australian lessees are, apparently, entitled to a refund.

Mr SCULLIN:

– The tax on Crown leaseholds was never suspended in Tasmania.

Mr Bell:

– Where are the Crown leaseholds in Tasmania?

Mr SCULLIN:

– If the honorable member knew something of his own State he would not ask such a question.

Mr Bell:

– There are not many.

Mr SCULLIN:

– It is true that one big lease would include the whole State, but by reference to the report of the royal commission, the honorable member will find that the tax on Crown leaseholds was never suspended in Tasmania and that every penny due in that State was collected. In this regard there seems to have been a breach of the spirit of the Constitution.

Mr Prowse:

– Hear, hear - if the facts are as stated!

Mr SCULLIN:

– They are, and I invite the honorable member to read the appendix to the royal commission’s report, which includes the reports of the deputy commissioners and officers of the Taxation Department in the six States.

Mr Watt:

– If that is true the department did not obey the Government’s instructions.

Mr SCULLIN:

– Apparently it did not. Western Australia is not a small State like Tasmania; it includes many very large leases. The department found no difficulty in collecting the land tax there, and collection was not suspended until an officer from the central office went to the West and told the Deputy Commissioner that the tax was not being collected in the eastern States. The budget papers of last year disclosed that the land tax yielded, in 1922-23, £2,018,876, and in 1923-24 £2,030,127- a total for those two years of tax of £4,049,000. Subsequent to the charges I made in this House regarding the administration of the act, the amount collected in 1924-25 was £2,519,000, and in 1925-26 it was £2,521,000.

Mr Watt:

– Was it not £2,800,000.

Mr SCULLIN:

– That was an estimate.

Mr Watt:

– It was the figure supplied by the Treasurer to the States.

Mr SCULLIN:

– The Treasurer told the States that the estimate was £2,800,000 for 1925-26, and his statement to the State Treasurers was made available to honorable members on 4th June, about three weeks before the end of the financial year. Apparently the Treasury officials were not able even then to make a more reliable estimate, and they adhered to the estimate of a year previously. Obviously the object was to make the States believe that they would obtain a lot of revenue by adopting the Government’s proposal. For the two years 1922-23 and 1923-24. the collections of land tax were £4,000,000, and in the subsequent two years they were £5,000,000. A large amount of the additional £1,000,000 collected consisted of arrears of taxation on large leaseholds, and they were not collected until after the fight on the matter in this Chamber. The incidence of the tax was not altered, and the rate of tax was not increased.

Mr RODGERS:
WANNON, VICTORIA · LP; NAT from 1917

– The valuations were increased.

Mr SCULLIN:

– But not sufficiently to account for the difference in the amount of the collections. The action of honorable members on this side of the House forced the Government to collect the arrears, and the addition of £1,000,000 to the revenue was made possible largely by our action. To what extent we were responsible we do not know, because we cannot obtain the details from the Treasurer. In his budget speech of last year the Treasurer said that the receipts for that year were £2,519,000, and the estimated receipts for the following year were £2,800,000. He did not say anything about increased valuations, but he did say that the reason for the increased receipts was twofold - that arrears were being collected on freehold lands, and that the Government was collecting on leaseholds. Those were the only reasons he gave. The reason for the enormous increase in collections was that, as a result of the investigations, the department was raked from end to end, and the money had to be collected; but, the Government, instead of generously giving the credit to those who put up the fight, has used all the forces at its disposal, including those of the Grown Law Department and the Treasury Department, to try to crash me.

Dr Earle Page:

– That is not so.

Mr SCULLIN:

– The Government failed to prove its case because I demanded the documents from the department. I obtained figures from every State, and I proved up to the hilt more than I alleged in this House. In the light of the fact that the Government has collected £1,000,000 more in the two years that ‘have just ended than it collected in the two years immediately preceding the storm in this House, how futile is it for the Treasurer ‘ and other members of the Government to attempt to side-track my charges! The Treasurer branded my charges as “ myths and illusions.” and he went through the country saying, “The royal commission we appointed has disproved every statement made by the honorable member for Yarra.” My charges are published in Hansard, and the proof.s of every one of them are in the official documents of the department. I have copies of those documents in my possession, and any honorable member may read them. I insisted upon having complete statements of the amounts of tax outstanding, and the names and addresses of defaulting taxpayers, and I have preserved copies of them, so that my opponents will never be able to allege that my statements were wrong. I spoke in this House of men owning large tracts of land evading taxes while others were compelled to pay up to the last farthing ; and I did so in the service of my country. Every possible attempt was made by faking the commission, by distorting my statements, and by making misleading extracts from my speeches to discredit me. The Government did not invite me to make the indictment, but drew up a series of charges, and itself appointed a judge to investigate them. The Treasurer, on oath, before the commission admitted that he took the report of my speech into his department and that he and his senior officers made extracts from it. Despite the fact that the accused’ Government framed the indictment against itself, and that it tore sentences from their context and framed questions containing words not to be found in my speech, my case was proved up to the hilt. What did the judge, whose remarks members of the Government have quoted as justifying them, say *1 Members of the Government have quoted the judge’s opinions, but I invite honorable members to read his finding on the facts. He ruled that under the terms of the commission he could not inquire why the Crown leasehold taxes had not been collected, although they represented on ‘ the .official figures 75 per cent, of the amount of taxation outstanding. He was not allowed to inquire into another .serious charge that the Treasurer broke the law by not submitting to Parliament the annual reports of the department. The reports of that department are like . the balance-sheet of a company, and should be presented to the shareholders annually; they are the only check we have on the work of the department.

Mr Watt:

– Is that responsibility placed on the Treasurer by statute ?

Mr SCULLIN:

– According to the statute the Treasurer must lay on the table of Parliament annually a report of the operations of the department, and the law also provides that there shall be placed on the table of Parliament every year a report showing remission* of land taxation; but for several years that had not been done. Those were the’ charges that I made, ‘but they were not included in the questions submitted to the commission.

Mr Watt:

– The fault, if any, was that of the Taxation Commissioner.

Mr SCULLIN:

– The commissioner is not in the same position in administering the land tax as he is in administering the income tax, and the Prime Minister misled honorable members by saying that he was in a similar position to the Auditor-General in regard to the administration of the land tax. With regard to income tax he may be, but not with regard to land tax. In the statute governing the powers of the commissioner., honorable members will find that he must administer the act “ subject to the control of the Minister.” Those words are not in the Income Tax Act. On page 199 of the minutes of evidence of the commission, the judge said, “ The questions limit my jurisdiction.” When protests were made to him, he said, “ I did not draw up the commission.” When he was referring to extracts from my speech, he said “I notice that the whole speech is not even set out on the back of the commission.” Yet the Government hugs the delusion that it was exonerated by the report of the commission, and members of the Government have quoted with satisfaction one extract from the report, which .says, “.Big pastoralists have no advantage over struggling farmers.” Can any member of the Country party produce for me a struggling farmer who had his land or income tax suspended for seven years? Can they produce for me a struggling farmer who, for seven years, refused to send in a land or income tax return, and was not prosecuted ?

Mr Prowse:

– Struggling farmers are not those whose land is valued at over £5,000.

Mr SCULLIN:

– That may be true, but where is the struggling farmer who avoided paying income tax for seven years 1

Mr Paterson:

– The honorable member is now changing his ground from land tax to income tax.

Mr SCULLIN:

– If the Minister will read my speech, he will discover that it refers to both land and income tax. I said that there was a vast differ ence between the way in which the Government treated big men owning land worth more than £5,000 and its treatment of struggling farmers who had to pay a few pounds of income- tax. The Government distorted my charges. My charges were levelled against the political administration of the” department, but the Government tried to shield itself behind a charge framed by itself against the Commissioner of Taxation. I did not charge the commissioner, for two reasons. The first reason was that I am here to deal with the political aspect of questions, and under the act everything the commissioner does is subject to the control of the Minister; and my second reason was that for years the commissioner had been protesting bitterly that the arrears of land tax had been allowed to accumulate. Mr. Ewing wrote to the Treasurer on 31st August, 1923: - .

The continued extensions allowed to Mr. Jolly were most generous. The concessions cannot be justified in the light of the law and of the treatment of other taxpayers.

Mr. Jolly was the agent for Sir Sidney Kidman. He was called to give evidence before the commission, and he said -

I called upon the Prime Minister and wrote to him asking for extensions of time for returns and payments of tax.

Asked whether the ministerial instructions asked for were given, Mr. Jolly answered -

I can only draw an inference from what occurred afterwards. The leniency was extended.

The departmental file, among numerous other things, shows that the Deputy Commissioner of Taxation (Mr. R. Chenoweth) wrote to the Commissioner of Taxation, on 6th September,. 1923, regarding Sir Sidney Kidman -

It is patent that the requisitions of the department have been ignored. The continued failure to supply returns required amounts to defiance of the department.

Officers said that without the returns Sir Sidney Kidman could not be properly assessed. One of my charges was discrimination respecting the application of the land tax. The taxation reports show that from 30 to 40 prosecutions take place each year for neglect to render returns. The procedure is to send a reminder, a final notice, and then a summons. What happened to Sir Sidney Kidman? A file 24 inches thick contained copies of his reminders, requests, final demands, threats, appeals, more final demands, more threats, and more finals, semi-finals, and semidemifinals, and late editions. That went on for seven years. Not until the matter was exposed in this House was a summons issued against Sir Sidney Kidman.

Dr Earle Page:

– It was issued before that.

Mr SCULLIN:

– I challenge the Treasurer to disprove that the summons against Sir Sidney Kidman was issued some weeks after the exposure of his conduct in this House. Judge Edwards, speaking in regard to Sir Sidney Kidman, said that he could not decide whether Sir Sidney Kidman owed money or not, because that matter was sub judice. Of course it was, because three days after I raised the subject in this House, a writ was issued against Sir Sidney Kidman for the recovery of £156,000, and so far as I know the matter is still sub judice. Judge Edwards said -

No reason was given for the non-prosecution in the case of Sir Sidney Kidman. . . . He was asked again and again to send in his returns. … I feel clear that Sir Sidney Kidman should have been prosecuted for failing to send in returns.

What did the department do before the royal commission?’ It actually instructed counsel to strive to prove to the commission that Sir Sidney Kidman did not owe it any money at all, but that he was in credit to the extent of over £4,000. That was a few weeks after the department had issued a writ against him for £156,000. What chance has the department to recover money in the court if it treats its own writs in that way? We have heard a lot about Mr. Edmund Jowett’s case before the court, but what can be said of the action of the department? It was the most desperate political defence ever advanced by a department of the Commonwealth. Within a few months of making that statement before the royal commission, the department demanded from Sir Sidney Kidman £5,631 for taxation arrears, and obtained it. No wonder the department is losing cases in respect of income and land tax. Figures were supplied to the royala commission by the Taxation Department. I ask honorable members to note that they were not supplied by me. The department obtained data from all over Australia, and presented as sworn evidence the following summary to the commission : -

That table was put in to justify tho department’s actions. It is one of the most damning documents that has ever been presented to any commission of investigation. It showed that of 4,747 persons owing land tax, 3,767 owed less than £100. That was put in to prove that there were a lot of small men amongst them. I went through the lists and found that the great bulk of those 3,767 persons owed amounts of from . 2s. 6d. and 5s. up to a few pounds over a period of fourteen years. The department, to build up its case, raked up arrears from all over Australia. The amount that the 3,767 persons owed represented 3 per cent, of the total accumulated outstanding tax. That was not mentioned by the department. Those figures were produced to prove that I was a liar in saying that the big men were evading payment of taxes. Whatever differences of opinion honorable members may have respecting the way in which taxes should be imposed, we ought to agree that when Parliament passes an act it should be efficiently and impartially administered by the department concerned. If one section of. the community evades any tax or obtains a suspension, an unjust burden falls upon . another section. The department has permitted suspensions, remissions, and evasions, and all those things should be strictly scrutinized. I cannot obtain the figures for last year showing the amount, of tax outstanding. We should have that information, but it is not contained in the miserable document that is called the budget. Eather than boast about creating a record in delivering budgets, the Treasurer should let us have a document similar to that which every ‘ preceding Treasurer has submitted to this House. Taking last year’s figures as in the budget, we find that the income tax outstanding was £2,572,000, and the land tax outstanding £1,847,000, totalling £4,419,000. I venture to say that that amount has been considerably reduced as the result of the discussion which took place in this House. Documents that had been raked up by the department from cellar to ceiling all over Australia were placed before the commission. My charges against the department have at least had a beneficial effect upon its administration. No bouquets have been thrown at me, although I have carried a large portion of the burden. Instead, I was threatened with penalties which included imprisonment because I would not disclose the name of the ex-officer who supplied me with part of my information.

Mr Watt:

– Was the honorable member threatened with imprisonment?

Mr SCULLIN:

– When I was giving evidence before the commission the act was read to me, because I refused to answer a question. What would become of the privileges of a member of Parliament if he could be compelled to answer such questions. The department, which is controlled by the Treasurer, deliberately framed the question to intimidate me.

I come now to the war-time profits tax. The budget discloses that from 1924 to 1926 the refunds exceed collections by £122,273. There must surely be something ‘ wrong : in the method of assessment.’ The majority of the taxpayers receive neither remissions nor extensions. They regard the Taxation De partment as a machine administering with stern justice an inexorable law against them. These huge amounts of outstanding tax every year must be a revelation to them. Since the light was thrown on the - Land Tax office - “ switched on,” as the Treasurer said at Ballarat before he became a member of the Government - the land tax collections have yielded an additional £1,000,000 for the last two years, as compared with the previous two years, although the rate of tax has not been raised. That has been due largely to the consistent and persistent action of the Opposition in this House. [Extension- of time granted.’] The Treasurer said that it was impossible to collect any of the land tax arrears. He has now achieved the impossible, and it is a greater performance than bringing the budget down on the 8th of July. One million pounds sterling has been salvaged.

Mr Foster:

– Not much of it has come from outback leases.

Mr SCULLIN:

– Only £380,000 was due on freeholds. We shall know the figures later. A sum of nearly £400,000 is worth collecting from the large land monopolists in this country.

Mr Foster:

– Much of that money would be collected unjustly.

Mr SCULLIN:

– Numerous persons evaded the tax unjustly. My charges against the department have been referred to by the Treasurer as myths and illusions, but they have proved to be facts. Ere the curtain falls on this fouract drama - Page’s Four Budgets - the Land Tax Act of 1910 is to be repealed, although it has served this country well. It was passed by the Fisher Government, and it broke up, in the first year of its operation, over £20,000,000 worth of large estates. It has not been so effective in recent years, and I have already dealt with some of the reasons for that, but for sixteen years it has done good work, and, instead of being repealed, it should be tightened up and strengthened in the interests of this country. To succeed in. filling Australia with immigrants from overseas we must break up the land monopolies here, and the land tax is one of the weapons that we can use to this end. The land monopolists have always hated the land tax;. and how the Government proposes to abolish it. Four years ago, the present Treasurer rushed into the spotlight, crying, “ Drop the loot,” but now the looters have got the drop on him.First of all he tried remissions and reductions in their favour, and now he comes along with a plea for complete exemption.

Mr RODGERS:
WANNON, VICTORIA · LP; NAT from 1917

– That was not in his first proposals.

Mr SCULLIN:

-No ; it is a later development. My final word on this budget is that it discloses that in the four years that the present Treasurer has been in office direct and indirect taxation combined has increased, expenditure from both revenue and loans has increased, foreign imports have flooded the country, and notwithstanding that we have had some wonderfully bountiful seasons, the national debt has continued to increase.

Mr GREGORY:
Swan

.- The honorable member for Yarra (Mr. Scullin) has delivered a long but very interesting dissertation on land taxation. If one were to accept his statements, he would be obliged to admit that there had been a certain amount of maladministration; but it is remarkable to me that although the honorable member told us that the report of the Taxation Commission, which was presented about eighteen months ago, left a stigma upon him, he has made no move until now to justify himself.

Mr Scullin:

– The honorable member knows that this is the first budget that has been introduced since the report was issued.

Mr GREGORY:

– Had I felt as the honorable member for Yarra says he feels, I should long ago have taken the extreme course of moving the adjournment of the House in order to justify myself.

Mr Brennan:

– The report has been pulverized a dozen times.

Mr GREGORY:

– It is hardly fair for the honorable member for Yarra to reintroduce the matter when the details have been almost forgotten ; but whatever may be said from his point of view, it is beyond question that the report completely exonerated the Taxation Department.

The honorable member complained bitterly about our huge importation of foreign goods, and our comparatively small exportation. It is a depressing fact that although since 1911 no less than £420,000,000 has been borrowed, exclu sive of loans for war purposes, for constructing such public works as those on the river Murray, railways, harbours, and roads, official statistics disclose that our exports were worth £20,000,000 less last year than in 1911, taking 1911 values as the basis of comparison. Undoubtedly, there is something wrong. I cannot understand why this country does not follow the example of the United States of America, which, while paying high wages and observing excellent conditions, has been able to increase her production by leaps and bounds. If the honorable member for Yarra (Mr. Scullin) urged the workers to follow the methods adopted in the United States of America, we should do something to encourage our land settlers and primary producers. If we did so, land settlement would increase naturally.

I have taken the opportunity to participate in the debate at this early stage for the reason that I have strong objections to certain proposals of the Government. I am a strong federalist, and have assisted right from the beginning to build up the federal sentiment. When I find a government in power which indicates that it desires to destroy the federation I shall do my utmost to endeavour to destroy it. I am afraid that this Government will destroy the federation if it continues to introduce legislation similar to that which has been before us recently.

At the moment I do not propose to enter into a detailed discussion of the road policy of the Government, but shall content myself now with observing that the adoption of a sound road policy would be of inestimable value to the Commonwealth. Although I am pleased that the Government has followed the example of the United States of America in assisting the States to build roads, I regret that I cannot support the proposals it has lately introduced. I shall take a later opportunity of fully discussing that question.

Iwish now to refer to the intention to abolish the per capita payments, the introduction of which was a complete surprise to me. I have no doubt that the intentions of the Government are good, but the road to Hades is paved with good intentions. If these proposals are put into operation they will spell disaster to the smaller States. I cannot understand why the Government did not announce its intention on this matter before the election was held. Had it done so and won a majority of seats it could have argued now that the people gave it a mandate; but as things are now it has no mandate, in any shape or form, to alter these basic, financial arrangements. The Prime Minister should have taken the people into the confidence of the Government when he delivered his policy speech a few months ago. Had he done so I am sure that some honorable members who are now supporting him would have failed to secure election. I do not know whether the Government desires to see unification accomplished, but its recent actions suggest that it does. “When the proposals for the amendment of our Constitution were before us recently I pointed out that the natural corollary to our taking power over industry and commerce was to seek full control over trade and commerce as well; and that if we did so and were granted it we should take from the States practically every power that was valuable to them. Finance is government, and by destroying the financial fabric of the States, and taking control of trade and industry, unification is practically achieved. The tactics of the Government in this matter have been faulty. It appears to me that it intends to go before the people and ask for extended powers, while at the same time it suggests, without actually saying so, that it will do its utmost to destroy the financial foundation on which the States stand. That is creating a good deal of ill-feeling between the Commonwealth and the States. The ink was hardly dry on bills authorizing the Government to seek increased constitutional power ‘ before it introduced its financial proposals, which practically changed the whole basis upon which the constitutional questions had been argued. We should be able to accept the figures of the Treasury without hesitation in matters of this kind, but the honorable member for Yarra has pointed out that, in his opinion, they are quite unreliable. That is most unfortunate. If the Government’s new financial schemes are consummated, the solvency of the States will be seriously undermined. All that the Prime Minister said in his policy speech of the 9th October in regard to the financial re lations between the Commonwealth and the States was -

More expenditure in charges renders necessary an examination of the financial relationship between the Commonwealth and the States.

Senator Pearce, who read a speech which had been approved by Cabinet, referred to the necessity for less involved methods of dealing with the per capita payments, and said that there would be a conference with the States; but he did not give a hint of abolition. The people generally gathered from those two statements that the Government intended to call the States into conference, as was done in 1909, to reconsider the matter. I thought that the Treasurer would merely ask the States to consent to a reduced per capita payment; I did not for a minute anticipate the submission to them of the drastic proposals that have been outlined. It is regrettable that when the Government was seeking the suffrages of the people last November it did not indicate more clearly what it had in mind. It lost another golden opportunity of making its position clear by not including the proposals in the Governor-General’s speech. All that was said on that point on that occasion was -

In view of the problems arising out of. the relations ‘between the Commonwealth and the States, my Ministers propose to invite the States to meet the Commonwealth in conference to consider these matters. A royal commission has already considered the position in Western Australia, and an investigation will be made into the circumstances of Tasmania. For the present year you will be asked to grant a subsidy of £450,000 to the State of Western Australia.

Special consideration has been given to the effect of the Navigation Act upon the State of Tasmania, and a bill will be introduced to deal with disabilities, affecting the passenger traffic.

The whole matter has been sprung upon the people, and, in my opinion, improperly so. In the discussions that have occurred between the Commonwealth and State representatives it has been denied that the States have a moral right to participate in any way in the Customs revenue; but I submit that no one who has studied pre-federation history, or has carefully read the Constitution approved by the elected representatives of the people, and the discussions that preceded its adoption, can deny that there is a moral right.

Mr Foster:

– The moral right is inherent in the Constitution.

Mr GREGORY:

-There is no doubt about that. Great difficulties faced those who sought to give expression to the national aspirations of our people. It was pointed out in the pre-federation conferences that many problems in regard to Customs revenue, tax collection, and various other matters would have to be solved before federation could be achieved. The late Sir Henry Parkes won a great name for himself by spending his energy in trying to solve these difficulties. The Australian Natives Association and men like Barton, Deakin, Griffith,. Forrest, and Kingston all showed their desire to establish a great nation beneath these southern skies. On three occasions, elected representatives came together from all parts of Australia for the purpose of framing the Federal Constitution. In his policy speech in October last, the Prime Minister spoke of the Constitution as an imperishable monument to the future of the Commonwealth; but, apparently, the right honorable gentleman would now attempt to destroy it. He said that the ideal of the framers of the Constitution was to weld Australia into one great nation, preserving to the States their right of self-government. What will become of that right if this Parliament destroys thefinancial foundations of the States? The Federal Constitution is the Magna Charta of the people. It embodies a great national partnership, giving the Commonwealth the control of all things that are national and assuring to the States the control of their domestic affairs. The spirit of that partnership seems to be dead in this Chamber ; but I assure honorable members that it is not dead so far as the people of the States are concerned. Our Constitution is the most democratic in the world. What other country has a Constitution under which property has no vote? Mr. Barton, referring to the Federal Constitution, said -

We havebuilt a federation on the most democratic lines, and property has no representation whatever;but property, especially in the smaller States, mustbear the hurden of all extravagances.

When an architect designs a house, he does not suit himself, but he meets the requirements of the people who are to live in it.Our Constitution was framed for the purpose of welding thewhole of the States intoa federation, with the one desire of building up a great nation, yet reserving to the States the control of their domestic affairs. The Treasurer, in one of his speeches, remarked -

The framers of the Constitution, however, considered it undesirable to give the States a permanent right to share in the Commonwealth revenues. Therefore, the Constitution limited the provision for the payment of at least three-fourths of the Customs and excise revenue to the States to the first ten years after federation, and thereafter until the Commonwealth Parliament otherwise provided. This system was known as the “ Braddon Blot.”

I do not propose to refer to the “ Page blight.” Let me quote the exact words of the Constitution -

During a period of ten years after the establishment of the Commonwealth, and thereafter until the Parliament otherwise provides, of the net revenue of the Commonwealth from duties of Customs and of excise, not more than onefourth shall he applied annually by the Commonwealth towards its expenditure. The balance shall, in accordance with this Constitution, be paid to the several States, or applied towards the payment of interest on debts of the several States taken over by the Commonwealth.

The Constitution provided that for all time the States should receive threefourths of the Customs revenue. When the first referendum was carried, it was not agreed to in New South Wales by the statutory majority. A meeting of Premiers was summoned at the instance, particularly, of the late Sir George Reid, who was a freetrader, to agree to a revision of the conditions of the payment of the Customs revenue to the States, Sir George being under the impression that the Commonwealth might be compelled to impose high protectionist duties to raise sufficient funds for its purposes if the provision continued in perpetuity. It was decided that this provision should apply for ten years, and thereafter as the Parliament might decide. The people were told that they should trust the Commonwe.alth Parliament, and they accepted that alteration. But it was not provided in the original Constitution, as stated by the Treasurer, that this money was not to be paid to the States in perpetuity. The Constitution, which is the foundation of the liberties of the people, has been referred to by the Prime Minister as a great ideal, and we should be extremely careful, therefore, that we do nothing that would tend to destroy it. Nothing is calculated to do more to bring about secession from the federation than the withdrawal of the per capita payments. The people of Western Australia already feel that they are harshly treated by reason of the increasing Customs duties and the. corresponding increase in the cost of everything they require. Mr. Barton, speaking at the last meeting of the Federal Convention, stated that, by the provision that’ for all time the States were to receive three-fourths of the Customs revenue, their finances were protected. I do not believe that the States would have voted for federation if they had not thought that they would receive justice at the hands of the Commonwealth Parliament. The Treasurer remarked, on another’ occasion : -

A careful reading of the discussions that took place at pre-federation conferences also indicates that it was generally thought that the Commonwealth Government should some clay take over the State debts, and manage them and pay the interest on them. Provision was actually made in the Constitution for that to be clone, and it was set out that if the Commonwealth revenue was not sufficient to pay the interest bills, the States should be levied on to make up the deficiency. This plainly indicates that nothing would be returned to the States.

That was a most unfair statement, because it was clearly enacted in the Constitution that, instead of the Commonwealth handing the revenue direct to the States, it should take over the State debts to the extent that that money would meet the interest bill. In 1909 this matter was again brought into prominence, and there was a clear understanding that, if threefourths of the Customs revenue was not to be returned to the States, the Commonwealth should take over the State debts and pay the interest bill. At the conference with State Ministers, held in Melbourne, in August, 1909, it was resolved : - -

That to fulfil the intention of the Constitution by providing for the consolidation and transfer of State debts, and in order to insure the most profitable management of future loans by the establishment of one Australian stock, a complete investigation of this most important subject shall be undertaken forthwith by the Governments of the Commonwealth and the States. This investigation shall include the question of the actual cost to the States of transferred properties as defrayed out of loan or revenue moneys.

At that conference, the- Premiers agreed to accept 25s. per head of the population, and it was decided that the Commonwealth should at the earliest opportunity take over a certain proportion of the State debts, paying the interest bill out of a proportion of the per capita payments. The Government has no mandate for the drastic change it proposes to effect. The moral right of the States to a share in the Customs revenue is incontrovertible. That the Commonwealth has a legal right to this revenue I admit; but are we to assume, as the Germans did when they marched into Belgium, that the Constitution is a “ scrap of paper,” or that the Government will not honour the promises of their predecessors? Is that the attitude that the Government and honorable members of this House are prepared to adopt? Before an alteration is made, the issue should be placed clearly before the people, and they should be given an opportunity to decide it for themselves. The Treasurer has said from time to time that the system of per capita payments is unsound, wrong in principle, unfair in its incidence, and stands in the way of the Commonwealth evacuating the field of direct taxation. What is wrong with the system, since this Government has placed before Parliament a proposal for road construction, which embodies exactly the same principle t What guarantee have we that, if the Commonwealth now retires from certain fields of taxation, some other ministry . will not next year, or at some time in the future, re-impose’ that taxation ? The honorable member for Yarra (Mr. Scullin) declared that, if his party got into power, it would re-impose the land tax.

Mr Scullin:

– Hear, hear !

Mr GREGORY:

– I was never more pleased than I was to hear the honorable member make that announcement. I trust that his statement will be spread throughout Australia,’ because it shows that the promise made by the Government in this connexion is not worth a scrap of paper. I am not reflecting in any way upon the honour of Ministers, but they will go out of office and the next government may re-impose this taxation, and leave the States stranded. One Parliament cannot commit another. If the next government reverses the action taken by the present Government, what are the States to do to provide for the requirements of their people ? The Treasurer admits, and I agree, that it would be impossible by a referendum to ask the people to insert in the Constitution a section preventing the Federal authority from entering the field of direct taxation. Should there be another -war it would be compelled to do so. The States can be given no guarantee in this matter. Once they forfeit their share of the Customs revenue they can be given no absolute guarantee that their interests will be protected. Surely a safeguard should be provided, and this can only be done by giving them a share in the Customs revenue. In the federation the Commonwealth authority has control of all national matters, and the State authorities control all domestic matters. The State Governments have borrowed some £600,000,000, and have to pay £29,000,000 every year in interest on their loans. The money they borrowed was expended upon development. The State Governments have built railways, harbours, roads, and schools. In 1923, they spent £9,663,000 upon education. Po honorable members desire that educational facilities should be curtailed ? Does the Treasurer say to the States, “ We shall not in future pay you all this money, but the Commonwealth will take over the work of education “ ? He does not. That work is still to be left to the States; and is the high standard we have built up to be destroyed by the forced poverty of the States?. In 1923 the amount spent by the States on charities, hospitals, asylums, and the care of neglected children was £6,471,000’. They spent on police £3,000,000, and on the administration of justice £430,700: These amounts, added to the interest bill of £29,000,000, make up a total of £52,500,000 which the States in 1923 had to provide in connexion with the domestic concerns of the people.

Mr RODGERS:
WANNON, VICTORIA · LP; NAT from 1917

– They also subsidized municipal authorities.

Mr GREGORY:

– I did not bother to take out the amounts spent by the States in that way, but I have shown that in 1923 the States had to find, for the purposes I have mentioned, £52,500,000. Now I ask honorable members to consider the marvellous growth of our Customs and excise revenue. In 1909 it amounted to £8,000,000 or £9,000,000; but last year it amounted to approximately £40,000,000, even after allowing for the added expenditure of the Commonwealth. The States undertake expenditure for the development of the country, and every man who comes to

Australia with a wife and three children is worth at once £32 or £33 to the Commonwealth, but is not worth a fraction to the States for probably twenty years. In view of the enormous growth of our Customs revenue - £13,000,000 more than in 1922,. when the present Treasurer assumed office - there should be no question of the absolute moral right of the States to a proportion of that revenue. The activities of the States are engaged in for the purpose of assisting the people. The Commonwealth has to provide for defence, and for old-age pensions, but beyond this it does not come into direct contact with the people. The States have ito provide for irrigation, railways, roads, water supply, harbours, and for advances to industries, fruit, meat, butter; all those industries are subsidized by State assistance. The States in some cases have assisted in building factories, and, in many cases, have suffered loss in connexion with advances made to industries. What effect is the Government proposal likely to have upon the State railways ? It must be clear that the State Governments will be compelled to increase railway freights followed probably by excessive land taxation. They must find some means of making good the loss of the per capita payments. They may have to economize in the facilities provided for education, and may have to cut down the amounts that are now paid for hospitals, asylums, and the care of neglected children. Do honorable members desire that such economies should be brought about? The Government’s proposals are ill-conceived, mischievous and undesirable from every point of view. They are further morally objectionable, because I have no doubt of the moral obligation of this Parliament to give a certain proportion of the Customs revenue to the States. Here is a paragraph that is worth reading -

If the Commonwealth were deliberately, endeavouring to strangle the States and bring about unification, it could not go on better lines than those it is pursuing at the present time. If it is the desire of the Government to dry up all the resources of the States in the way of available taxation, it seems to me it should not be done sideways, but by a boldly avowed policy.

Do honorable members know who used those words? They are quoted from a speech made in this chamber in 1922 by the Treasurer himself.

Mr Bruce:

– In fairness, the honorable member should admit that the Treasurer is not proposing to dry up the resources of the States, but to hand over to them new fields of taxation.

Mr GREGORY:

– The right honorable gentleman was probably not present when the honorable member for Yarra told us that as soon as his party got into power it would immediately reimpose land taxation. I. do not doubt the honesty and integrity of the Government. I know the Prime Minister too well to suggest any such doubt, but the Government can give the States no guarantee that the right to exploit the land tax, the entertainment tax, and the estate tax will be continued to them, because the next Government might reimpose the whole of that taxation. The States are asked to sacrifice their birthright. We always have reason to fear the Greeks when they bring gifts, and when the Treasurer says to the States, “ I give you the right to levy all this taxation,” they should be very cautious, andshould think, as I am thinking, of the future. I say that this Parliament would do wrong to agree to the Government’s proposal. .

Mr Bruce:

– I do not wish to interrupt the honorable member, but I think he will agree with me that we can give the States no guarantee that the per capita payments will be continued, any more than we can give them a guarantee that the taxation he has referred to will not be reimposed.

Mr GREGORY:

– That is so. I quoted the speech of the Prime Minister, and also of Senator Pearce to the effect that there should be a conference to deal with these matters. Why was it that they did not take the people into their confidence, and state their intention to completely alter the financial conditions? I say that until the Government goes to the electors, and receives an absolute mandate for the change in financial administration it proposes, it is not justified in making so important a change. I am personally prepared to put out of office any Government whose action is calculated to destroy the federation and bring about unification. The proposal of the Government has not received reasonable and proper consideration. The Government made certain proposals to the State Premiers; it asked them to say whether they would agree to the scheme suggested. It was not a question of asking the States to say whether they would accept a reduced per capita payment of 22s. 6d. or £1, but with a pistol at their heads, “ Will you accept this proposal?” The State Premiers said that they would not accept it. According to the Treasurer’s figures’, each of the States would gain by the proposed arrangement, but the honorable gentleman’s figures were not entirely correct. He said that the diminishing payment to Western Australia is now incorporated in the grant of £450,000, and remains stationary for a period of five years, and then there would be a diminishing period ; but, as a matter of fact, the amount which Western Australia would get for a period of five years was only £300,000.

Dr Earle Page:

– That does not take into account the relief proposed to be afforded in connexion with the taking over of the north-west portion of the State, which has yet to be considered.

Mr GREGORY:

– The honorable gentleman said that an amount of £152,000 was provided for one year, and the honorable member for Yarra interjected -

Is not that cutting into the special grant for Western Australia?

The Treasurer replied -

No, because the diminishing payment is now incorporated in the grant of £450,000, and remains stationary for five years instead of diminishing.

That is not a fact, because the amount of £150,000 for the northwest is absolutely in the air. I should like to say here that I for one will oppose for all I am worth any proposal that would have theeffect of reproducing in the north-western part of Western Australia the conditions which we find in the Northern Territory. The Government must admit that the administration of the Northern Territory from the time it was taken over by the Commonwealth up to the present has been an absolute failure. I shall have strenuous objections to such a failure being repeated in the north-western part of Western Australia.

Mr Parsons:

– The present is the first Government that has tackled the problem of the Northern Territory.

Mr GREGORY:

– No; since its transfor to the Commonwealth all Federal Governments have been tackling it and bungling it. The honorable member knows nothing at all about the subject. Big, efforts have been made in the past to settle people in the Northern Territory, but they have been in the wrong direction, and all the socialistic proposals tried were absurd. The present Prime Minister is doing good work in appointing a commission for the administration of the Territory, if a good commission is appointed; but I am satisfied’ that unless we are prepared to make big sacrifices to enable people to develop, the Territory economically, no commission is likely to do any good. I am averse from any portion of Western Australian territory being transferred to the Commonwealth to be administered as the Northern Territory has been. I resent the fact that each time the Treasurer has referred to the grants to Western Australia, he has’ made it appear that such assistance is a form of charity. The people of that State want not charity, but justice. If investigation shows that because of the high Customs duties, and the provisions of the Navigation . Act, and other Federal laws, Western Australia is suffering disabilities, it is fair that some compensation should be paid to it by the more fortunate States. New South Wales and Victoria reap immense advantages from the policy of high protection. Large numbers of people are employed in their industries, and the cities, if not the country areas, are developing rapidly. Queensland derives great benefit from the protective policy, that imposes such great hardships upon Western Australia and Tasmania. The Tariff Board’s report, in regard to Western Australia’s position, included this statement: -

So obvious are the financial difficulties under which the State is labouring, and so frequent the criticism that is - encountered, that the board was able to arrive at the conclusion that the situation was critical, and warranted a full and sympathetic investigation with a view to amelioration. This opinion reached by the Tariff Board was arrived at after investigations and interviews with representative groups and individuals covering the area between Geraldton and Albany which the board traversed. During the journey the board had the privilege of hearing leading politicians and public officials, commercial men, primary producers, and manufacturers, from all of whom information was gathered which enabled the board to arrive at the conclusion that Western Australia was labouring under special and serious disabilities arising out of Federation:

Following the presentation of that report, the Commonwealth appointed a royal commission to report upon the. disabilities of

Mr. Gregory.

Western Australia. The Treasurer stated that it had not been demonstrated to the satisfaction of the Government that federation has depreciated the position of Western Australia. I could quote to the committee the reports of the Government actuary and other authorities, regarding the enormous losses which that State has’ suffered. Having regard to the report of the Tariff,’ t Board and the royal commission to the same effect, what more evidence does the Government require? The majority report of the royal commission stated -

That until the State of Western Australia is granted the right to impose its own Customs and excise tariffs, the Commonwealth shall pay to the State a special payment of £450,000 per annum, in addition to the 25s. per capita payment made in accordance with clause 4 of the Surplus Revenue Act of 1910, the aforesaid special payment to include the special annual payment now being made to the State of Western Australia in accordance with clause 5 of the said act. The above special payment of £450,000 to commence on the 1st July, 1924.

Commissioner Mills recommended that a special grant of £300,000 should be paid by the Commonwealth to Western Australia for a period of ten years on the assumption that the present capitation allowance of 25s. per head of population would continue for that period, and that if the. special grant of £300,000 recommended were made, the diminishing special grant should cease. It is quite right that’ the diminishing grant should cease if a special grant were made for a definite period. The Government propose to resign in favour of the State certain fields of taxation, and to make a special grant of £300,000 per annum for five years. In addition, it proposes to pay to the State for one year an amount of £152,000 to make good any losses that might .accrue from the readjustment of its financial relations with the Commonwealth, this payment to be reconsidered next year. No State should be placed in the position of a mendicant, and have to come cap in hand to the Commonwealth each year for the means with which to carry on its services. If the special grant of £300,000 is made to Western Australia, that State will be receiving from the other States only a partial return for the great wealth yielded to them by the protective tariff. In 1909, when the per capita payments were agreed to, the Parliament decided that Western Australia should receive a special grant of £250,000, diminishing at’ the rate of £10,000 a year, the amount to be paid equally by the States and the Commonwealth. There is no reason why those States which benefit particularly from the policy of the Commonwealth Parliament should not make some reimbursement to those States which are the losers. Western Australia’s experience in recent years has been particularly hard. To some States the war brought great financial’ advantages. Over £150,000,000 was spent in Australia in connexion with the war, and the greaterpart of the money was distributed in Melbourne and Sydney. Western Australia received little or no advantage from that expenditure. A very high percentage of the most capable young men in the community enlisted, and as a result of the heavy exodus from the gold-fields, the quality of the labour available for the mines depreciated.

Mr Mann:

– Every other industry in Western Australia had the same experience.

Mr GREGORY:

– Yes. The State balance-sheet has shown enormous losses for many years, and now the great gold mines of Kalgoorlie and Boulder are closing down. The inevitable decline of those areas has been precipitated by the high tariff, the Navigation- Act,, the high cost of living and production, and the huge sums spent upon railways, water supplies, and other public and private works on the gold-fields will become a tax on the community. I draw the attention of the Prime Minister (Mr. Bruce) to the written speech sent by Senator Pearce to Perth, in connexion with the last election campaign, and published on the 9th of October. Dealing with the proposed special grant, he said -

Although this proposal is made for this year pending the holding of the conference with the States on Federal and State financial arrangements, to which I have already referred, it is recognition and an admission by the Commonwealth that the finding of the royal commission justifies Western Australia receiving that amount of financial compensation, and that it therefore establishes a basis upon which any future financial relationship should rest.

This is a clear statement that the Government would give effect to the report of the commission. In his budget statement, the Treasurer quoted a statement made by Mr. Norbert Keenan, K.C., who presented the case for Western Australia before the. Disabilities Commission. He, like, myself, is a sincere federalist, and de sires to build up in this country a powerful and united nation. 1 should like to impress upon the committee the following passage from his address to the commission : -

If the Commonwealth authority decided not to recognize the claims of the State, or of those engaged in an industry carried on in the State, such a decision would not merely affront all sense of justice, but also engender a deep feeling of distrust on the part of the people of the State. Nevertheless, it would, no doubt, be borne aB many wrongs have, in the world’s long history, been borne, in the silence of subdued resentment. Suppose, also, the Commonwealth authority not to recognize the claims of this State to consideration because of the policy of the high Customs tariff…..

Again, I say, such refusal would be borne as one more wrong done to the weak by the strong. Suppose, again, the Commonwealth authority refused to recognize any claim by the State founded on breach by the Commonwealth of the understanding on which this State agreed to enter the Federation….. No doubt this State would continue to suffer such wrongs in silence. Suppose, lastly, the Commonwealth authority refused to take on its shoulders any fair share of placing new settlers on the vacant lands….. What is the inevitable end of things if all these wrongs, as the State conceives them, are left unrighted. There will be no room for choice….. The State will seek some relief from a partnership which has brought disaster upon her, and so endanger, if not ruin, the edifice which has been created by the genius and patriotism of Australia’s noblest citizens.

There is in Western Australia ‘ a strong and growing feeling against federation, and I believe that if the question were submitted to a referendum, the majority of the people would vote for secession.

Mr Coleman:

– But they cannot secede.

Mr GREGORY:

– It is idle for the honorable member to talk of what people can or cannot do when they are goaded to desperation. This Parliament is doing us grave injury, and trying to destroy the magnificent efforts we are making to people the country; and we are not likely to face certain ruin without going to extreme measures to protect ourselves. I do not cry “ stinking fish “ of Western Australia. The State is making wonderful progress. The figures quoted by the Treasurer showed that enormous development is taking place, and I- propose to submit some further statistics, supplied to me by the State. Government, regarding the large number of people who have been successfully settled under the group scheme when discussing the items. In group settlements alone, between 9,000 and 10,000 people, representing 2,200 families, have been placed on the land, and they are worth, to the Trade and Customs Department, £33 per head per annum. I urge honorable members to read the two articles published in the Argus recently under the name of Mr. Donald McKinnon. He is a competent judge of land, and he has reported in the most glowing terms of the Western Australian wheat belt, which extends from 60 miles north of Northampton, southwards and eastwards to Southern Cross, and still further in a south-easterly direction towards Esperance. Even in the dry areas, there is a ‘ great advantage in that a large part of the 10-inch rainfall occurs during the months when crops are growing. I am satisfied that the country, as it develops, as the new holdings become mixed farms, and as the rabbit pest is abolished and water supplies provided, will be very wealthy and contain a great increase in the number of people. Western Australia will become as prosperous as any State in Australia, and Western Australians are proud of it.

Mr Watt:

– That is not the story, we heard from Western Australians when the Western Australian Grant Bill was being debated.

Mr GREGORY:

– The honorable member has mistaken our complaints against the Federal authority, which has ruthlessly destroyed our mining industries, as calumnies against the State. We can build up a prosperous State, but we may have to do it alone, and not as part of the Federation. I have always endeavoured to make it clear that the States have a moral right to this money. The drastic change proposed should not be made until the people, at a general election, have approved of it. The people should have some say in the method of financing this country, for if absolute authority is conceded to this Parliament, disaster will result. It is generally recognized that on such an important matter this Parliament should consult the electors. The Government proposes to allow the present arrangement to stand subject to an alteration of the budget; but I urge the Prime Minister not to make the alteration. If he does make it, it will be my duty reluctantly to move an amendment, which must be construed as one of want of confidence. The policy of the Government is wrong, but if the people had approved of it, the duty of honorable members would be to carry it out. At the present stage the Prime Minister has no right, for party or any other reasons, to claim the support of those honorable members who think that the whole fabric of the Federation will be destroyed by the action proposed. It has been stated that a financial rearrangement will be made, and that the States will receive the same amount of money in a different way. I hope that the Prime Minister will agree to allow “the matter to remain in abeyance until the next election.

Mr MANN:
Perth

.- I would prefer to postpone the full discussion of the subject of per capita payments until the debate on the States Grants Bill, but I am compelled to discuss it now for’ a reason, which may not be at first apparent, to which I wish to direct the attention of honorable members. Part 4 of the budget statement - that part which has been added to deal with payments to or for the States - embodies the whole of the proposal, and if the budget be passed the States Grants Bill will be unnecessary, except as a formal measure. In other words, the question must be decided on the budget. If page 375 of the Estimates is passed without alteration, the States Grants Bill will have gone by the board. I hope that honorable members will realize that fact, particularly as no private member can move for the insertion of an item that has been omitted, or for the increase of an item. The capita^ tion payments to the States are not included on page 375, and therefore it is necessary that the subject be discussed now. It is a pity that this, by far the most important, feature of the budget should have to be debated this way, and should overshadow other important questions. No proposal of the Government is of more far-reaching importance, or calls for more earnest consideration by honorable members, who carry a responsibility for the development of their States. Even to the extent of voting against the Government, I shall adhere to my contention that the per capita payments, which are an inalienable right of the States, should be continued, and that the attempt to abolish them will shake the foundations of the federation. The Commonwealth is a federation of six sovereign States, It was formed on the plan that the central Government should have certain functions, which were denned as strictly as possible. It may be that those definitions, which were thought to be clear, have been stretched unduly; but the idea was that the functions of the Commonwealth should he limited, and that all duties, except those enumerated, should devolve upon the States.

Mr West:

– Which was an upsidedown arrangement 1

Mr MANN:

– That 4s a matter of opinion. What the honorable member thinks about the matter is unimportant now, but, what is important, is what the people of Australia thought, and the form of government they determined upon when they formed the federation. The honorable member may be ‘right in his opinion, but he should not ignore, merely because it does not coincide with his own views, the decision of the people. Although the States were expected to recognize and support the central Government, the Commonwealth had to preserve and assist the States. It was necessary to hand over to the Commonwealth large revenue-producing departments, and the States were left with many unremunerative services to perform. Thus, when the federation was determined upon, the great difficulty was to make satisfactory financial adjustments ; for a long time the question of how the States were to be financed, delayed the federation, and it was only when the proposal known as the “ Braddon blot “ was made, that a solution was found. It is generally assumed that the financial section in the Constitution is the same as the original “ Braddon blot,” but that is not so; it is a modification of the “ Braddon blot.” The Braddon clause specified that three-fourths of the Customs revenue should permanently belong to the States.

Mr West:

– The word “permanently” was not used.

Mr MANN:

– The provision was put into the draft Constitution without any limitation as to time, and in the event of its adoption would have been a permanent part of the Constitution until altered by a referendum.

Mr Coleman:

– Thank God it was not put in the Constitution!

Mr MANN:

– I regret very much that it was not included. The State from which the honorable member comes was responsible for it not being included.

Mr Coleman:

– For the same economic reason as the honorable member’s.

Mr MANN:

– That was not so. It was done by a deliberate alteration of the conditions. When the Constitution had been accepted by the convention, and was submitted to the States, the enabling; bills passed by most of the States required a majority of 50,000 votes at the referendum. New South Wales/ however, would not pass such a bill, but insisted upon a majority of 80,000. When the referendum for the acceptance of the Constitution was submitted to people of the States, all the States except New South Wales passed it with the necessary majority of 50,000, and New South Wales, although it had a majority of more than 50,000, had less than the loaded majority of 80,000. That is what prevented the adoption of the “ Braddon blot,” and that selfish action by New South Wales has created most of our subsequent difficulties.

Dr Earle Page:

– What would happen now if there were a provision in the Constitution that the States should receive three-fourths of our Customs revenue t

Mr MANN:

– Many things would be different, and the development of Australia would have proceeded along different lines. The final compromise waa that which exists now, that the arrangement should continue for ten years. At the expiration of that period a bludgeon, was flourished over the- heads ‘ “of the States, and ‘ that bludgeon is now being held over their heads again’. The provision “was to continue for ten years, or until Parliament otherwise provided; and that ‘was interpreted to mean that Parliament could vote it out of existence if “it wished to do so. I am not a lawyer, but I have asked lawyers if they agree with that interpretation, and they have replied,’ “ Certainly not.” Their view is that this Parliament, if it did not provide the money in that way, must provide it in another way; only the method of provision could be altered, and not the amount of payment. Therefore, the interpretation that Parliament could discontinue the payments of its own resolution is incorrect. . To interpret the provision in thatway is to hold a threat over the State Parliaments, which have been told that if they do not accept the per capita payments, they will not receive anything. I well remember the grave dissatisfaction caused by the conference at which the per capita payment was agreed upon. Some of the States accepted the principle unwillingly, but they believed that the Commonwealth had the big end of the stick, and therefore they had to make the best of a bad bargain. It was not a question of falling back upon their constitutional or moral rights at all. They were intimidated by the threat that if they did not accept the capitation payment they would get nothing at all. Had the States conferred together at that time, and presented as united a front as they do to-day to the present financial proposals of the Commonwealth, this serious position would not have arisen.

Mr West:

– All the States were represented at that conference ?

Mr MANN:

– Yes, but they had to accept the Commonwealth’s proposal or nothing at all. It was thought then that the per capita, payment was to be continued for ten years, or until Parliament otherwise provided. From the beginning of federation, as has been already pointed out by the honorable member for Swan (Mr. Gregory), the capitation grant was closely linked with the transfer of State debts. Under the original Constitution, the Commonwealth could take over only the State debts existing at the time of federation, but when the capitation payment was decided upon a proposal was submitted to the people by referendum that the capitation payment be made a part of the Constitution. It was rejected by the people, because they did not wish to permanently commit the States to a small share of the Customs revenue.

Mr Scullin:

– The people objected to the principle of tying the hands of future governments.

Mr MANN:

– That argument was used by the politicians who were against the proposal. “ Trust the federation “ was the cry used to overcome the reluctance of the people to accept federation, and on a wave of patriotism it was carried. The cry that it was not fair to bind the Parliament was used in regard to the proposal to embody the capitation grant in the Constitution. When the proposal for the per capita payments was submitted to the people by referendum, they were asked at the same time to allow the Commonwealth Government to take over, not only the State debts in existence at the time of federation, but also any others. Subsequent events have shown that there was a lure in the submission of those two proposals to the people at the one time. They were given to understand that if the capitation payment of 25s. a head was not restricted, the removal of the limitation on Sltate debts would facilitate their transfer to the Commonwealth. The people were gulled, and agreed to both proposals. The Surplus Revenue Act of 1910 contains the phrase “ Until Parliament otherwise provides.” That means that if the Commonwealth Government ceases the per capita payment, it must provide an equivalent in some other form. The act says, “ Until Parliament otherwise provides,” and not, “ Until Parliament otherwise determines.”

Mr Bruce:

– Is the honorable member arguing that the word “provides” is used in the act in the sense of giving or providing something?

Mr MANN:

– Yes.

Mr Scullin:

– It will not bear that interpretation.

Mr MANN:

– It implies that the Commonwealth Government must meet the capitation payment or provide for it in some other way. The act provides that the Commonwealthshall pay to each State, by monthly instalment, or apply to the payment of interest on State debts taken over by the Commonwealth, an annual sum of 25s. a head. We have always recognized the right of the States to a share of the Customs revenue, because without it they would be unable to finance their activities. They were persuaded to enter federation on that understanding, the alternative being that their debts would be taken over by the Commonwealth. At every Premiers’ Conference until that held in 1923, this right has been strenuously fought for by the State Premiers, and whenever the capitation payment has been discussed, the transfer of State debts has been linked with it. I am astounded that at the recent conference held between the Commonwealth and the State Premiers the transfer of State debts was not referred to by the State Premiers.

Mr Bruce:

– That subject was not raised at the conference of 1923, nor at the recent one.

Mr MANN:

– So I have gathered. When the State Premiers vere asked to submit an alternative to the Government’s proposal, they should have referred to the transfer of State debts. They were wrong in not doing so, but were right in maintaining their claim on moral grounds to a share of the Customs revenue, whether in cash or by the Commonwealth utilizing it to pay the interest on their debts. During the war, our politics fell into a bad state. One subject overshadowed everything else, and we allowed our domestic relations and our study of domestic economy to go unconsidered. We are now emerging from that period, and the people are beginning to turn their attention more to fundamental matters of government. The people are taking more interest in politics than they did before. We should rightly use our efforts, intellects, and energies to find solutions of our domestic problems. If the capitation payment is to cease, a permanent guarantee should be given to the States by the Commonwealth paying interest on transferred debts. The Prime Minister (Mr. Bruce) interjected, when the honorable member for Swan (Mr. Gregory) was speaking, that the Government could not give a permanent guarantee respecting per capita payments any more than it could respecting special grants. But I maintain that by taking over State debts the Commonwealth. Government would be under a permanent obligation to meet the interest payment. The debts could not be handed back to the States. At the conference previous to that of 1923, the State Premiers were keenly interested in obtaining a settlement of the transfer of State debts. If a provision were inserted in an act giving effect to the present arrangement, say, for a period of years, or even inserted in the Constitution, it would be liable to alteration, but a transfer of debts could not be altered.

Mr Cook:

– The people could be taxed to meet the interest payment.

Mr MANN:

– The people are being taxed now to meet the interest on State loans. They cannot be taxed twice for the same purpose. The States that are small in population and development have been told that under the proposed financial arrangements it will be possible for them to get better treatment, because the cessation of capitation payments will enable the Commonwealth to make grants in proportion to the needs of the States. It has been suggested that Western Australia and Tasmania would be very much better off under that scheme than they are at present. I believe that the Government is perfectly sincere, and that the Prime Minister desires to help the backward States. That has always been a special feature of his policy.No Government, even with the best intentions in the world, could achieve that objective under these proposals. The Government is inconsistent on one point only. It says that the capitation grant is putting an undue strain upon Federal finances; that it is necessary to separate Commonwealth and State finances; and that the grant must cease to enable a reduction of taxation in various directions to take place. My reason for saying that is that the following paragraph appears in the official memorandum on the separation of Commonwealth and State debts: -

The responsibility for the reduction of indirect taxation rests entirely on the Commonwealth, whichhas exclusive powers of imposing Customs and excise duties. In 1901-02. the amount per head of the Customs and excise revenue was £2 5s. 6d. ; in 1912-13, £3 5s. 8d.; whilst, in 1925-26, the estimated yield is £6 4s. This year, relief from revenue duties to the amount of £750,000 per annum has been granted. As soon as the finances permit the question of giving further similar relief must be faced. Further relief would directly benefit national development and enable Australian industries better to compete in the oversea markets.

I say “ Hear, hear !” to that. It is a new and welcome note in government pronouncements. The memorandum continues -

A reduction of Customs duties or the substitution of bounties, resulting in the lowering of prices and the stimulation of production, mightwell prove tobe of more benefit to some of the States than an equal amount provided by way of Commonwealth subsidy to the State.

It has been stated that, while it may be possible for the Commonwealth to continue the per capita payments to the States for a while, the time must arrive when they will have to be abolished, for very heavy commitments are facing the Commonwealth in the comparatively near future. If that is so, how can the smaller States expect to receive larger grants? The more straitened the Commonwealth’s finances become, the less likelihood is there of it making bigger grants, for it will undoubtedly make grants. in accordance with its financial position. The policy of making substantial grants to the small States must always be unpopular in the larger States ; and I say, with all due regard for the honesty of the Government in advancing this argument, that there is no guarantee whatever that the smaller States would be better off under the new proposals. The deciding factor in the matter will always be the voting power of the community, for the bulk of the revenue will always, be spent in the States where it is raised. We can never hope that the large States will look favorably upon the policy of regularly granting large sums to the small ‘States, and I am not reflecting upon their Federal spirit in saying that. In these circumstances, it is unreasonable to expect the small undeveloped States to forgo their constitutional right to the per capita payments, on the bare promise of a Government which in a very little while may be unable to. honour it. Under the proposed arrangement, the per capita payments are to be replaced by special grants for five years; and, as the honorable member for Swan. (Mr. Gregory) pointed out, the payments to Western Australia are dependent in a degree upon her transferring .a portion of her north-west territory to the Commonwealth, which is a matter that should be considered quite separately. The position that the small States have to face is that, if this proposal is ratified, the special payments will cease in five years, and that is why they view with alarm the Government’s proposal. It has been argued that it is necessary to separate Commonwealth and State finances, for it is ‘ wrong in principle for one body to raise the money and another to spend it ; but I submit that, even if this proposal is approved, the existing methods will be perpetuated. The Commonwealth will raise the money and make it available to other authorities to spend ; and the weaker States will be put in the position of having to depend upon the generosity of a paternal government. With all due respect, I say that it is misleading to tell the smaller States that their acceptance of this scheme will improve their position. We should not appeal to greed and cupidity in that way; but should look at the Broad, general principle. Only those who are closely in touch with politics know that such grants as the Treasurer says will be made to the States from time, to time must be passed by Parliament each year. A change in the personnel of Parliament might mean that they would be discontinued. .The undertaking, of the Commonwealth to vacate the field of direct taxation might be departed from within twelve months -after it was given. As a matter of fact, the only limitation that can properly be put upon the taxing authorities is the /taxable capacity of the people. The Treasurer himself cannot guarantee that any promise he may make will be kept. I do not say that in a personal way; but no one would be more ready than he to agree that, if an emergency arose, it might be necessary for the Commonwealth, at very short notice, to- find new avenues of taxation. It is said that we should trust the Federation. We did so years ago, and we have fallen in over it. The section in the Constitution authorizing the Commonwealth to enter the field of direct taxation was put there with the object of enabling it to secure all. the revenue it needed in a time of crisis. The authority was not exercised until the Great War occurred, when it was determined that, as our manhood of eligible age was giving itself to the country’s service, our wealthy people should give their wealth to it. Until all war liability is banished, that section must remain in the Constitution. The cry that the Commonwealth should evacuate the field of direct taxation will not be warranted until our war debt has been, at least, substantially decreased ; but we should not attempt to connect the Customs revenue with the war debt. The fact that the war debt and Customs figures approximate from some points of view has nothing whatever to do with the matter.

Mr Watt:

– There is no justification for ear-marking any kind of taxation.

Mr MANN:

– I agree with the right honorable member. I maintain that the Commonwealth should no more enter the field of direct taxation, except to meet a national emergency, than, having entered it for that purpose, it should vacate it until things are once more normal. I feel very strongly on this matter. I am glad that our war debt has been diminished in the last twelve months by £28,000,000; but it is regrettable that the general national debt is still increasing. Until the war debt has been diminished to a much greater extent, T think the Commonwealth is entitled to continue imposing direct taxation to reduce it. Then, and then only, can it be expected to cease disarranging State finances as it has undoubtedly done in the last few years. I feel a good deal of sympathy with the attitude of the State Governments in this matter, and I am positive that if more members of this Ministry had had experience in State Parliaments, greater appreciation of the difficulties the States have to face would be shown. I had intended dwelling somewhat on a few of those difficulties, but the honorable member for Swan (Mr. Gregory) has covered that ground. If I had not been called away on urgent business I should have spent a little more time in discussing the question of migration. Although the Commonwealth is bearing the interest burden of the migration loans for five years, there is no doubtthat later the States will feel the crushing weight of it. In my opinion that is unfair. The Commonwealth will undoubtedly reap more benefit from the influx of migrants than the States are likely to do. To some extent the States have been remiss in not looking at this question from the point of view of transferring their debts to the Commonwealth. It is not too late to make the suggestion that they should be transferred to the extent of the per capita payments, and I hope that the Prime Minister and the Treasurer, realizing that the opposition to the proposal is widespread, will reconsider it. I hope that the Government will not ask the committee to pass the budget as it stands, because it will commit us to the proposal.

Mr Scullin:

– Consideration of the States Grants Bill should have preceded the budget;

Mr MANN:

– Yes. The budget has been presented, and it is now technically before us; but, if it is passed before that bill is dealt with, discussion on that measure will be futile.

Mr Scullin:

– The Government made light of the opinion of Parliament when it embodied the proposal in the budget before the necessary legislation had been passed.

Mr MANN:

– It may be the intention of the Government to pass the States Grants Bill before the budget is passed.

Mr Scullin:

– If the budget is passed the House will be committed to the proposal.

Mr Watt:

– We should see that we are not.

Mr MANN:

– Am I to understand that if we pass the first item of the budget, which we are now discussing, we shall be committed to agreeing to all the items on page 375.

Mr Watt:

– No; but special appropriations cannot be altered.

Mr MANN:

– In the earlier part of my speech I pointed that out, and said that all we could do at this stage was to move that an item be reduced. If the special appropriations are passed we shall be committed to that bill.

Mr Watt:

– They are passed already.

Mr MANN:

– In this case there is not an appropriation, but the extinction of an appropriation.

Mr Watt:

– There ought to be freedom of action on the States GrantsBill.

Mr MANN:

– Exactly. If the Government intends to settle the issue by passing the budget, it is unfair to the committee. We should be allowed to discuss the matter on the States Grants Bill. I hope that the more experienced members of the committee will give it the benefit of their opinion as to how the difficulty can best be solved. I am still appealing to the Government. There seems to be an idea in the minds of ministers that approval of their proposal is growing in the country; but I assure them that that is a delusion. I recently spent five days in my electorate, and I asked people of every shade of political opinion what they thought of the proposal. If the views they expressed may be taken as indicative of the feeling of the people of Australia’ generally, a serious situation will arise should this proposal be forced upon them.

Mr West:

– When I discussed the matter with my constituents they told me that they were prepared to leave it in my hands.

Mr MANN:

– There may be people in certain walks of life who are prepared to give the Government scheme a trial, trusting the Commonwealth Parliament to see that the States get a fair deal. I am ready to trust the present Government to do that; but what may happen when its term of office expires? We should take an impersonal view of the situation, and endeavour to protect legally the interests of the whole of the States. The only way in which tho people can show what they think of the proposal is by their vote at the forthcoming referendum, and, so far as I *an see, there is no doubt whatever as 4o the effect it will have upon their decision. I am reluctant to take up my present attitude, but my first duty, I think, is to those who have sent me to Parliament. To give way on this subject would be to sacrifice their interests. I am in a similar position to that of the honorable member for East Sydney (Mr. West), who said that his constituents were prepared to trust him in the matter. Knowing what the views of the people in my electorate are, I am bound to say that I would vote against the proposal no matter what the consequence might be.

Sitting suspended from 6.25 to 8 p.m.

Mr WATT:
Balaclava

.- At the outset of the few observations I desire to make to-night, I should like to compliment the honorable member for Yarra (Mr. Scullin), who opened this debate, on the extraordinary industry, clearness and powers of presentation which his speech exhibited. We are becoming accustomed to efforts of this kind from the honorable member, and I think his speech was a distinct contribution to the debate. May I also be permitted to say that, unfortunately, such preparation is not often exhibited in this House, probably because of the busy life which men like ourselves have to lead.

Like the honorable member for Yarra, I feel out of step with the Government in connexion with its budget. There are several of its phases with which I find myself in total disagreement. Knowing how he has applied himself to the discharge of his important office, I say this to the Treasurer (Dr. Earle Page), more in sorrow than in anger. The speed displayed in the preparation, presentation and consideration of the budget seems to me to embarrass Parliament. It will doubtless embarrass another place as well as ibis House. This may have been designed, or it may have been accidental, but whether it is due to design or to accident, it prejudices proper methods of legislation. There are certain features, for example, that deserve careful research and deliberation; and it appears as if they are to be all pushed through without sufficient analysis or understanding by the representatives of the people. When dealing with item No. 1, which is now before us, the committee is ex- ‘pected to pronounce upon such far reaching and widely differing policies ‘as the per capita grant to the States, the remission of certain direct taxation, road subsidies, and special new forms of motor and spirit taxation. I hope that the Government will not assume that when we pass item No. 1 we shall have concluded the argument on all these important proposals of the budget. Each of them ought to be, and I think must be, considered individually on its merits when the respective bills dealing with them are submitted for consideration. I do not propose to trouble the committee with figures to-night. I shall endeavour to discuss in broad outline certain prominent features of policy and procedure which the financial statement embodies.

The outstanding feature, so declared by the honorable member for Yarra and other speakers, which distinguishes this budget is the proposal to withdraw the per capita grant to the States. To my mind, with the solitary exception of the war and the great and fundamental issues it involved, this is the most important question with which the Parliament has been asked to deal since the inauguration of federal union. To appreciate its importance properly, one ought to review its. history, and thus obtain an understanding of the causes which have brought us to our present position. I may be permitted to make that review very briefly. I promise not to trespass unduly on the patience -of the honorable members in my reference to the establishment of the financial relations between the Commonwealth and the States. First of all, it will be remembered that when the Convention which drafted the Constitution finished its work the Braddon section was expressed in such a form that so far as the Fathers of the Republic were concerned it was to be a permanent constitutional provision under which the

Commonwealth was obliged to hand back to the States for all time, or until the people approved of a constitutional alteration, three-fourths of the Customs and excise duties raised within the Commonwealth. Had it not been for the technical defeat pf the original Commonwealth Constitution Bill in New South Wales, because a statutory majority in its favour was not obtained in that State, that would undoubtedly have been the position facing us to-day. The defeat of the. Commonwealth Constitution Bill led to the celebrated Premiers’ Conference, at which the heads of the State administrations met m Sydney and decided to make two important alterations in the Constitution for recommendation to the people through their respective Parliaments. The first was the provision relating to the Federal Capital, under which it was guaranteed to New South Wales, with a limitation as to the nearness of the site to Sydney. The second and more important alteration proposed was that the Braddon section of the Constitution should be terminable in ten years from the date of assent being given to the bill enacting the Constitution. Under that provision the Braddon section of the Constitution expired on the 1st July, 1910, and the Parliament was then free to “otherwise provide” in relation to the distribution of Customs and excise revenue to the States. A little before that - in 1909 - the States in conclave with representatives of the Federal authority agreed, after two years’ debate, to a substituted scheme known is the per capita grant. The arguments used at the conferences, in several of which I had the honour of taking a part, need not be traversed here, but the representatives of the States felt, on hearing the representations of the responsible leaders of the Commonwealth, that as the Commonwealth grew it could not for very much longer continue to hand back 75 per cent, of the Customs and excise receipts to them. They made a compromise arrangement with the Commonwealth for a payment of 25s. per head of population for all time. I say that because it fell to the lot of two men, of whom I was one, and the other was the then Attorney-General of Queensland, now Mr. Justice O’sullivan, of the Queensland Supreme Court, to draw up the case for the States and the agreement which was eventually signed by Mr. Deakin on behalf of the Federal Government. It was to be embedded in the Constitution for all time that a payment of 25s. per head of population should be made to the States. That was submitted as a proposed amendment of the Constitution to the people, and was rejected, but not by a very large majority. The first Fisher Government was then in power, and it decided that it would recommend to this Parliament, which was entitled to deal with the matter, that, -as the referendum had failed, for another ten years provision should be made for the payment of 25s. per head of population to the States. On the 1st July, 1920, the Parliament would have been entitled to alter that provision in principle or in amount - just as it saw fit. Those of us who were responsible for the proposal, which was framed as a substitute foi the Braddon section, were naturally disappointed at the defeat of the referendum. But it has seemed to me since, looking at the events which have supervened, that, after all, it was a providential escape that this provision was not permanently embedded i a the Constitution. The war has changed the whole nature of the problem, and has made the responsibilities of the Commonwealth with respect to past finances associated with it, and with respect to probable or possible future events, vastly bigger than ever the fathers of the Constitution could have imagined. I speak in this way as one, and I think the only one in this Parliament to-day. who has discharged responsibility in connexion with this matter as Treasurer of the Commonwealth and also as Treasurer of a State. I claim to have endeavoured, and I think I have succeeded, to take the positions of the Commonwealth and the States into respective review. It is because I feel keenly on this question as to the necessity for careful and dual-sided analysis, that I desired to speak early in this debate. This brings us to the situation in which we find ourselves today, and the present proposals of the Government. The first thing I note about them is that they differ substantially from the last proposals which emanated from this Government in former years. The next thing I note about them is the haste with which they were submitted to the conference of Premiers and to this Parliament. The bill was, I think, introduced on the 4th June. That meant to the States, in the form in which the measure waa introduced, 26 days’ notice of the termination of _ the receipt of revenue amounting, according to the last figures, to over £8,000,000. I think that in itself is an invitation to prejudice and to hostility on the part of those who were to be so seriously affected by the new proposals of the Government. The third thing I notice about- the procedure associated with the development and introduction of these proposals was the absence of the Prime Minister (Mr. Bruce) from the last meeting of the State Premiers, at which they were to be considered. I speak, I hope, with due restraint in this matter ; but I regret that in connexion with so serious a national question as this, personal or party feeling, or even considerations of dignity, as between Government and persons should have prevented amicable consultation between the leading men of Australia to consider and settle this most important question. On that aspect of the matter I shall say no more at this stage. These are the things which seem to me to point to what are, shall I say, the errors of judgment of the Commonwealth Government in dealing with this part of its financial policy. This, however, is not the whole story. There were equally heinous blunders committed by the representatives of the States, and it is just as well to frankly acknowledge and proclaim them in this chamber. For example, the proposals of the FederAl Government were laid before the responsible leaders of the State Administrations in conference assembled; and what was the reply to the Commonwealth Government ? It was nothing but a sulky “ No.” There was no courteous acknowledgement, no analysis; simply a defiant and obstinate silence or just that sulky “ No.” That is not the way in which business between governments should be transacted. Whatever the representatives of the States may have thought of the Government’s proposals, wisdom and courtesy should at least have combined to dictate a full discussion of them, and the question whether their ac-

Mr. Watt. ceptance should be recommended to the Parliaments and people of the States. No alternative was submitted by the representatives of the States, who said that they could not accept the proposals of the Commonwealth Government. In my time, failing acceptance of the Commonwealth proposals, we would have submitted some alternative, so that Parliaments and people might judge between two schemes. What an extraordinary difference there was between this meeting of State Premiers and the meeting to which the question was referred seventeen years ago. In 1909, fully eighteen months before the expiration of the Braddon section, the States of their own volition entered upon an elaborate analysis and investigation of the problem which was closing in around them. It was the States who invited the Commonwealth to meet them and hear their arguments for a substituted scheme, and it was really their scheme which the Commonwealth Government finally accepted. The action of the representatives of the States in those days encouraged approach by the Federal authority, and stimulated the settlement, for the time being, of their most pressing problem. The only argument which, so far as I can see, arises from the last conference of the State Premiers on their side of the case is the moral right of the States to the continuation in some form or other of the payments they have been receiving from the Commonwealth for the last sixteen years. I do not attach much weight to the claim to a moral right. Looking over the history of the financial relations of Commonwealth and States, I recognize that the Braddon section itself was a compromise, the best obtainable by the men who laid the foundation of federation, and, at best, a guess as to the probable financial requirements of the Commonwealth. The discussion as to the percentage to be returned to the States, whether 75 per cent., 20 per cent., or any other proportion was never based on any consideration of moral right, but the States which, at that time, carried the whole public debt of Australia, made it plain that they could not think of federating unless they were assured of the return to them of a fair proportion of the Customs and excise revenue which they were voluntarily surrendering. The Braddon section was a business arrangement based upon a rude guess as to the probable financial requirements of the Federal authority. We honour the men who founded the Commonwealth, and whether or not we agree with the federal principle embodied in the Constitution, or with the financial arrangement which was eventually arrived at, we must recognize that they were at the time the biggest men in Australian public life, were well chosen by the people, and did their task to the best of their ability. Nevertheless, they read very badly the financial future of the Commonwealth. I have been perusing the reports of the debates of the Convention to ascertain the views expressed by those men who were best able to judge what money the Commonwealth would be likely to need. The Convention was assisted by an able finance committee, which was presided over by the then Premier and Treasurer of South Australia, and first Speaker of this House, Sir Frederick Holder. He submitted to the Convention at various stages, and finally at a meeting in this chamber, his estimates of the Customs receipts and the cost of federation. Some brief extracts from Sir Frederick Holder’s statement may be both interesting and illuminative to honorable members. In reply to a question by the then Attorney-General of Victoria, now Mr. Justice Isaacs, he said -

We will take the Customs revenue at a little over ?6,000,000.

I ask honorable members to note that the best financial minds of the Convention reported that for a period of seven years after the inauguration of federation the Customs revenue of Australia would be ?6,000,000. Sir Frederick Holder proceeded- - and the total expenditure of the Commonwealth at about ?300,000.

At a later stage Mr. Isaacs interjected– ?300,000 would be enought

Mr Holder. ; Absolutely. I can conceive of a special emergency of the Commonwealth requiring ?1,000,000 of money; but an expenditure of ?1,000,000 over and above the ordinary expenditure of ?300,000 contemplates nothing short of a national emergency.

To-day, we think lightly of a loan bill for ?12,000,000, and our Customs and” excise revenue total ?40,000,000. In the last ten years Australia has been through the gravest national emergency that ever confronted a young country. In the light of these facts the estimate of so competent a financier as Sir Frederick Holder, that a national emergency might cost the Commonwealth ?1,000,000, indicates the darkness iu which the members of the Convention laboured. In analysing the financial deliberations of the Convention, the evidence is plain that the delegates could not see beyond their own noses. Many things they did not foresee which this Parliament has not merely learned, but has been obliged to meet. One was the transfer to the Commonwealth of the responsibility for old-age pensions, which at the inauguration of the union existed in the States of Victoria and New South Wales. The cost to the former State was about ?230,000 or ?240,000 a year, as compared with ?2,000,000 to-day. The voluntary surrender by the States of this power, under section 51, and the reaching out for it in natural sympathy by the Federal Parliament, meant the piling up of a load, the effect of which upon the allocation of financial responsibility and power between the Commonwealth .and the States, none of the men who assisted to place it in the Constitution could foresee. The inevitable growth of Federal responsibility in this and in other directions clearly showed how unsuitable and unfair the original Braddon section had become. That is why the per capita system, which also was a compromise, was substituted. For a year before that arrangement was reached half the States, and sometimes more, wavered between a desire to retain a reduced proportion of the Customs and excise revenue and the acceptance of a fixed amount. The conference wa3 finally influenced to accept a fixed per capita payment by the powerful voice and mind of William Kidston, of Queensland, who said, “For God’s sake, let us be sure of what we are to get and not be dependent upon the fiscal eccentricities of the Federal Parliament. We have the big obligations ; let us be sure that we shall get 25s., or whatever amount per capita may be agreed upon; and then we can build our enterprises upon a sure basis.” The Treasurer has truly said that the per capita payment is not scientific. But I do not know of any political proposal that is scientific in the sense that a scientist would use the term. The per capita arrangement fails to take into account the area of a State or the stage of its development ; it is based entirely upon population, and yet ignores the differing ages and sexes of the respective populations. For example, it places the virile young manhood of Western Australia upon the same basis as the older populations of Victoria and New South Wales, which include a much larger proportion of old people who are incapable of earning. The comparison is by no means satisfactory to the advocates of the per capita grant; but, like the original Braddon section, this arrangement was the best compromise obtainable. I have come to the conclusion that matters of this kind are not to be determined by any consideration of moral rights or wrongs. How best to arrange the finances of the Commonwealth and the States in view of their respective constitutional obligations and governmental activities, and the provisions of the deed of partnership, is entirely a business question. .

Mr Mann:

– Does not morality enter into business engagements?

Mr WATT:

– In a broad sense, moral considerations influence every phase of life; but no argument that influenced the Convention or the subsequent conferences of Commonwealth and State representatives was based upon morality.

Mr Gregory:

– That argument was not raised.

Mr WATT:

– Why have the States waited for 25 years before raising it?

Mr Gregory:

– They did not doubt the justice of the Commonwealth Parliament.

Mr WATT:

– The question was raised in another form in the New South Wales Parliament. When the Braddon section was discussed the argument used by Sir George Reid in connexion with the second referendum, and by Sir Edmund Barton in connexion with both referendums, was “ Trust the Federal Parliament.” Twentyfive years elapsed before we were told that the question as to how many sovereigns shall drop from the pockets of the Commonwealth into the pockets of the States is a moral one,, and that on moral grounds alone the States base their resistance to the proposals of the Federal Go vernment. I submit that a proper arrangement will be one based upon the financial conditions of the Commonwealth and the States, after due consideration of their respective activities, and how best we can apportion the power to tax and the proceeds of the taxation when collected for the mutual good of both constitutional entities, and the people generally. Therefore, I take no stock of the claim to a moral right.

Mr Foster:

– The views of the respective parties may be just as varied in another 25 years.

Mr WATT:

– They may, and I hope to show that if we attempt to settle in a few weeks a problem which has exercised the ingenuity and intelligence of some of the best minds of Australia for the last 25 years we may, within a few years, be compelled to undo the arrangements we make now, and put back the hands of the clock. The Treasurer seeks to divorce the finances of the Commonwealth from those of the States.

Mr Scullin:

– With a view to an immediate re-marriage by way of a roads grant.

Mr WATT:

– That will be only alimony. I understand, that the Government does not contemplate any reunion, but, if the lady behaves herself, further alimony in the form of a surrender of certain fields of taxation, and road grants and other - exotic aids. The principle which the Treasurer is endeavouring to assert - that the spender should do the foraging, that the man who gets rid of the money should find it - is quite sound. Thus only can we unite responsibility and power in accordance with the invariable aim of British constitutions. But, after all, this is an academic principle, and whilst it may be advisable to use it as a straight edge, it is not always possible, to follow principles to their logical conclusion without injury to interests that have become wisely vested in certain authorities. The question that concerns me .is whether we may not at this stage pay - too much, at the invitation of the Government, for the affirmation of an academically sound principle. For instance, will Australia as a whole be benefited by the disarrangement of the finances of its constituent States, merely to uphold what in the minds of most people, including some students, is a vague principle. If we effect this change without due consideration and measure we shall certainly undermine the stability of the

States, and thus detrimentally affect the credit of Australia generally. To so disturb State finances as to create large local deficits and bring six necessitous States - we have only two at present -cap in hand to the Federal Treasury for assistance, will be a calamity to them and to us. Having looked at matters from both points of view, I warn the Treasurer that that will be the probable result of the proposed action. The Treasurer talks in an easy way about the task which confronts the States, of readjusting their finances within the area of taxation surrendered by the Commonwealth. The honorable member for Yarra (Mr. Scullin) placed his finger on one electric button when he referred to the upper houses of Australia. I speak as one who had to fight upper houses for six years.

Mr Brennan:

– Does the right honorable member term the upper houses “electric buttons”?

Mr WATT:

– I do not say that the upper houses are “electric buttons,” because I know that, frequently, they are morgues inhabited by slow-minded persons. I meant that the clairvoyant mind of the honorable member for Yarra, like Homocea, had “ touched the spot “ ; and it is a spot worth pausing to consider, because we are a democratic Parliament in every sense of the word. Our two houses of Parliament are elected simultaneously on a universal suffrage, and they can be swept clean by a breath of popular disapproval. . But the upper houses of the States have the power to say “ no,” although they have not, in every case, the power to alter financial proposals. The honorable member for Yarra has referred to the land tax proposals of 1909-10. If ever a government put up a fight for a graduated land tax in this little corner of Australia, it was put up then, and after months of strenuous, if not skilful, fighting, we were forced to accept defeat from the upper house on an issue which, we believed, if it had been decided otherwise, would have been economically valuable to this State, and would have yielded a revenue much needed by it. Every State except Queensland has this lion in the path of the democratic adjustment of taxation. Consider, for a moment, land taxation. Is it thinkable that, even if they had the power, the

States would impose any taxation comparable with the Federal land tax which the Commonwealth is proposing to surrender ?

Mr Bell:

– They certainly would not.

Mr WATT:

– The voice of the sluggard State speaks truly for that State.

Mr Bell:

– Why sluggard ?

Mr WATT:

– Is any proof needed ? If ever a statue is built to Tasmania, it will have its hand extended for a tip. I do not . say that of the honorable member, whom I like, but of the little spot of land to the south of Australia. Even the State of Victoria, which is as democratic as any part of Australia, cannot speak on this subject through the lips of democracy. I have read the statement that the States can aggregate estates. How can they do that? All the information which the Treasurer said is available in the Federal Land Tax Office will be of little, if any, value to the States if they are challenged for aggregating estates in other States for the purpose of taxation. It is unthinkable that persons who hold land in four States would be taxed by four States as they are now taxed by the Commonwealth. I do not know what the law says about that; but if the High Court, and possibly the State Full Court, were appealed to, they would probably say that the States could tax only land within their own borders, and could not take into account land owned by taxpayers in other parts of the .world, or of Australia. That, however, is a conclusion which is arguable, but is riot determined by what the Treasurer has said.

Mr Prowse:

– Does the same argument apply to income tax?

Mr WATT:

– Surely, if my conclusion be true. If the New South Wales Government proceeded to tax a man who earns money in New South Wales, but does not live there, upon his business transactions in other States, for which he is not accountable to them, there would be a fruitful opportunity for litigation.

Mr Scullin:

– Taxation in more than one State would apply mainly to companies.

Mr WATT:

– Yes; that is a question that must be argued by constitutional students and lawyers, but cannot be regarded as settled. I come to the conclusion that this ‘proposal to abolish per capita grants should not have been embodied in the budget. The procedure is too hurried, and although the Treasurer may say that the Government has postponed taking action until 1927, it is, in effect, prejudicing the case of the States by altering taxation arrangements, and paying the money to the State treasurers from different coffers. Does any one imagine that to sever the relations of the States and the Commonwealth as to revenue is to declare the financial independence of the States? The debt question is basic. Important as is the question of revenue, our solid load of debt is a bigger question by far than per capita grants. When this federation was made the debts of Australia, in round figures, were £200,000,000. We spoke of them as debts, but actually they were investments in big State undertakings. For many years those undertakings in the aggregate paid interest, sinking fund, and working expenses. There were years when that was not done in certain States, but generally, and on the whole, it was done. That was clearly demonstrated in 1909, 1910, and 1911. It had taken the States 50 or 60 years to pile up debts of £200,000,000, but thirteen years afterwards their debts had increased to £400,000,000. By 1926 the debts had increased by another £200,000,000 to £600,000,000. The 6,000,000 people of Australia owe, apart from the debt of the Commonwealth, roughly, £600,000,000. How long is this ‘increasing of debts to continue? The Treasurer has done his best to form a loan council, but one of the States has refused to co-operate. So far as his operations have gone, they have been beneficial; but with the State that controls 42 per cent, of the people of Australia out of the arrangement, his efforts cannot succeed. With this huge debt mounting up beside and in front of us, we cannot face the future with equanimity; and on top of that debt there is the inevitable war debt of £400,000,000. This little community of 6,000,000 has a public debt of £1,000,000,000, which is £400,000,000 more than the public debt of Great Britain when the war broke out, when the population of that country was 40,000,000. Although much of our money is invested in undertakings that are wholly or partly reproductive, there must come an end to the incessant competition in borrowings and the constant increase of the State debts. Having collaborated with financial men in this country who have tried to see their way through the smoke, I venture to say that the reduction of the State debts cannot be brought about unless the Constitution is altered so that the debts of Australia are controlled by the Commonwealth. That would not be palatable to the States, but it would lead eventually to a co-ordination in finance which would be immensely more valuable and influential than this important, but smaller, question of per capita grants.

Dr Earle Page:

– Does the right honorable member suggest control of all State borrowing by the Commonwealth?

Mr WATT:

– I do. I have said so at State gatherings when speaking for the Commonwealth. I would fight the States on that, but not disorder their finances and compel them to seek grants or munificence from the Commonwealth. We cannot place the public debt of this country on a safe pedestal while it remains in the hands of seven authorities. In 1919 a scheme was promoted by the then Government for the consideration of the States for the gradual reduction of the per capita grants. It had the unanimous approval of that Government. The Leader of the Government was absent in connexion with the peace negotiations, and it was my duty to place the proposals before the States. The proposal was for a gradual reduction of the per capita grants. We told the States that it was our intention to reduce the payment gradually by the small amount of 2s. 6d. a year until it waa reduced from 25s. to 10s. It was suggested that it should remain at 10s. for at least five years, and, after another revision of the finances of the Commonwealth and States, the final settlement could be made. Circumstances prevented the adoption of that proposal, but I think the Treasurer will agree that if he could start again he would rather have that scheme than that now proposed. I do not say that because I was associated with the proposal. The Treasurer’s fear is that it would lead to an annual argument; but I do not think so. If the States had the proposal properly presented to them, accompanied bv the offer to surrender taxation which the Commonwealth is ‘ now prepared to make, but was not then able to make, they would accept it. We gave them at least eighteen months’ notice of a shrinkage of 2s. 6d., compared with the notice now given of 24 days of the total abolition of the grant. We did not know what we owed the British Government, what our war debt would amount to, what repatriation would involve us in, and what the war pensions would cost us; and we could not talk surrender of taxation. The Government now is in happier circumstances, and can, with wisdom, talk surrender. It should deem that scheme worthy of consideration even now as analternative for discussion with the States, coupled, of course, with the offer to surrender and re-adjust taxation. That scheme would give the States time to turn round, to think out their problems, to re-adjust their finances, and to develop their great assets. The Commonwealth has all the bad assets in Australia. Public undertakings are a dead weight around our necks, but the States are in the reverse position, because they have growing assets. I speak from memory when I say that when I was Treasurer of Victoria the total revenue from the Victorian railways was £5,500,000. That was twelve years ago. To-day it is £11,000,000.

Mr Gregory:

– The railways are not necessarily more profitable to-day.

Mr WATT:

– They are more profitable in this sense at least, that greater privileges are being given to farmers and other freight providers, and greater conveniences are being given to passengers, and at the same time the balance-sheet is equally good. Thus there has been enormous progress in the States, and if they economize and nurse and develop their assets, those assets will all bc winners. It will not be for generations that that can be said of ours. Their sustenance money should be gradually reduced in such a way as to enable their assets to be properly developed, and so cause little or no hardship, disorder, and friction. I propose, when the States Grants Bill comes before the House, to move an amendment, as a matter of principle, to test the feeling of honorable members respecting- the total abolition of the capitation grant as proposed by the Government and the gradual shrinkage of it as proposedby a former government. I hope that the Treasurer will not lose sight of the importance of the debt question. He has been a long time in control of the Treasury, and he has been able, as it were, to sit on the mountain top and to survey the whole of the conditions of Australia. He has been able to see in perspective the due relationship of debt to our present conditions and to our probable future. Instead of nibbling at the Constitution or at this portion of our financial arrangements with the States, he should tackle the whole thing at one time and let the people see what benefit would really result from the abolition of competitive borrowing and the proper co-ordination of loan raising. If he did so he would, I believe, obtain the full consent of the States and of the people to a truly basic financial reform. But he will work havoc with the present proposals if he persists in pushing them to a settlement.

I wish now to deal with the road policy of the Government. I hope that it will not be thought, from my utterances, that I am unsympathetic about a good road policy. As a matter of fact, if I may be permitted to introduce a personal note, I claim responsibility for the inauguration of the first road policy in Australia - the introduction of the CountryRoads Board of Victoria, which body began its operations about eighteen months or two years before the war. Had it not been for the war, the whole of the roads of Victoria would by this time, because of that board’s activities, be in the order in which some of our main roads happily are to-day. I have always been an advocate of good roads, not merely to increase the pleasure of living, but for the advantage of the producers by decreasing their costs and providing easy access to markets. We must push forward with that policy if we are wise people. But the Commonwealth road proposals are outside the Constitution, if I read it aright. I am not alone in this opinion, because in 1925, when for my sins I was, as Speaker, confined to the chair and not permitted to participate in the debates in this chamber, the honorable and learned member for Kooyong, now the AttorneyGeneral, uttered some very pregnant warnings about the risk that we were taking in our roads policy. I do not know how his conscience is at present.

Mr Brennan:

– That was the reason for. his promotion.

Mr WATT:

– I think that his promotion wasdue to other and better reasons.

Mr Brennan:

– It is a common thing for a dangerous man to be made a Minister to keep him quiet.

Mr WATT:

– Then it is time that the honorable member was made a Minister. The dramatic introduction of the road policy, and the equally dramatic intervention of the honorable member for Kooyong, will be remembered. I think that it was William Pitt who was on one occasion called a theatrical young man. I am not accusing the Attorney-General of being theatrical. He is probably the least histrionic man in this House; but this was a dramatic episode in his life of which I remind him. At that time he said quite a number of things which the committee should now hear again. He said -

I am sorry that I am unable to join in the general chorus in praise of this bill. Of course, everybody agrees as to the necessity and desirability of making good roads in Australia. We want more roads and ‘better roads. The question is: Who should make them?Should itbe the Commonwealth Government or the State Governments? In proposing, year by year, legislation of this character the Commonwealth Parliament is placing itself in a difficult position. It is merely granting financial subventions instead of devoting its revenue ito the work which should properly concern it. Although the Commonwealth Parliament has no power to legislate for main roads as such, we are discussing a bill the object of which, as we all know perfectly well, is to make possible the construction ofmain roads, without considering at all whether this admittedly desirableobject is one of the objects with which the Commonwealth legislature ought to concern itself. I venture to assert, although I know it will be unpopular to do so, that in passing legislation of this description we are not acting constitutionally. This Parliament has no power to legislate for main roads.

Mr Brennan:

– The roads in the Kooyong electorate are very short.

Mr WATT:

– They are not subsidized by this Parliament, nor will they be affected by any arrangement which the Commonwealth may Be making. The honorable and learnedgentleman also stated -

The Commonwealth Government has no power to raise a finger to construct main roads . .. It is only because the Federal Government has more money that it knows how to spend that these grants have been made. … If we were to reduce Commonwealth taxation, and to confine ourselves to our proper functions, the States would find it easier to raise the money required for their roads.

Those are words of wisdom. I do not know whether the Attorney-General is sorry that he uttered them, or how he squares his conscience with his support of the proposals of the Cabinet. At that time he denounced this thing in which now not merely is he participating, but to the giant extension of which he is agreeing; I refer to the offer of £20,000,000 for roads.

Mr Prowse:

– Is it constitutionally sound now?

Mr WATT:

– I do not yet know what attitude the Attorney-General is taking. If the honorable and learned gentleman was correct in the advice that he solemnly gave this House - for which he was not paid - then this proposition which figures so conspicuously in the policy of the Government and in the budget, can and ought to be challenged in the proper place as unconstitutional. Those of us who believe in the observance of certain principles regarding the Constitution should make an effort to challenge it. The other night, when the honorable member for Boothby (Mr. Duncan-Hughes) moved a very salutary amendment to the Judiciary Bill, the Attorney-General warned him that the amendment, although only partially innocuous, was by inference against the spirit of the Constitution; it was on the border line. That amendment was carried indefiance of the Attorney-General’s warning. But, according to him, this proposal is not merely by inference against the spirit of the Constitution, but is wholly unconstitutional. If we agree to this proposal, one of those responsible for it will be the Attorney-General, who said that it was improper. If it is right for the Commonwealth to subsidize main roads, why should it not subsidize the State railways?

Mr RODGERS:
WANNON, VICTORIA · LP; NAT from 1917

– We have done so.

Mr WATT:

– No; we have merely agreed to assist in the unification of gauges. Then what about hospitals, education, lands administration, and water conservation ? Should the Commonwealth subsidize those things ? Are all these activities of the State to be gradually invaded by a wealthy Commonwealth Government, which ia bent on increasing its popularity and aggrandizing the national Parliament? Surely that is no way to bring about alterations of the Constitution in principle or effect. That ought to be done in the way the Prime Minister is attempting in other directions - telling the people the story, and getting them to amend the Constitution. We should not go further with the road proposition, however much roads are desired by a large section of the community, until we are quite sure that we are on the right path constitutionally, and until we have obtained permission to do it. Is it logical or sane to plead poverty to the States and to withdraw their sustenance money, and, at the same time, to distribute princely largesse with prodigal hand. Can they believe us when we tell them that we have no money for capitation grants, and, at the same time, give them money for roads, money which we are not obliged to give them ? W’e refuse them necessaries and, offer them luxuries. These remarks apply with equal force, not only to the road grant, but also to the- housing, wirenetting, and other propositions. It is proposed, I understand, from the Treasurer’s observations, to earmark for roads £1,500,000, to be raised from duties on petrol, tire, and motor chassis. To show the weakness of this policy, let me point out that the users of Australian tires and Australian distilled spirit will not pay any of this tax, so that it is clear that some of those who use the roads will pay nothing towards their upkeep. There is opportunity to evade taxation. Regarding the tire duty, I say, as one who has been associated with that branch of business for many years, that the Australian tire duties are high enough. The tire manufacturing companies of Australia, and I defy contradiction from any one who knows the facts, are able to-day to compete with the importers, and they have never done better business. I do not say that the duties are high, but they are high enough, and no duty should be higher than that. The petrol duties, as the honorable member for Yarra has truthfully and forcefully said, may be regarded, for this purpose, as revenue.earning duties. Yet they are clearly protectionist duties, -heavily disguised though they may be, and this is not the frank way of putting them before Parliament. I offer five objections to this proposal for raising this £1,500,000 to be hypothecated for State roads. The first is that motorists are already sufficiently taxed. Under Federal and State taxation, there are heavy imposts on the use of pleasure and commercial vehicles impelled by motor spirit. Secondly, this tax, as the honorable member for Yarra pointed out, will hit the petrol consumers who do not use motor cars. Farmers, dyers and cleaners, and all sorts of people who do not help to wear out the - roads, will have to pay these duties in some form or other.

Mr RODGERS:
WANNON, VICTORIA · LP; NAT from 1917

– Some petrol users are not allowed to take their petrol-driven machines, such as tractors, on to the road.

Mr WATT:

– That is so; they are not road-users. Thirdly, many road-users will not be called upon to contribute under this scheme. Users of iron-shod vehicles, horse-drawn vehicles, will not be called upon to pay anything, nor will the users of Australian tires or Commonwealth Oil Refineries spirit. The fourth objection to it is that for some reason or other - it may be that tha Treasurer is country born, represents a country seat in this Parliament, and leads the Country party - although 60 per cent, or 70 per cent, of the road damage by motors is done within our urban areas, those roads are not to receive any subsidy. Noi a penny of this money is to be devoted to their maintenance. That is, obviously, as unfair as it is unsound: and has raised the ire of the municipal authorities in all our capital cities. I have another objection to take to the proposal, and I trust that I shall not be accused of being parochial in offering it. Victorian road-users consume a very large quantity of motor spirit, and their roads, in many cases, are in good order. I should like to know whether the Treasurer proposes to ear-mark the money raised in Victoria from this source of taxation for use on Victorian roads; or is some of it to be spent in other parts of Australia? If so, it is an objection, though not a fatal one, that Victorians who have paid, and are still paying heavily for their good roads, will have to offer. Altogether, this proposition seems to me to have all the defects that any scheme could possibly carry; and I trust that the Minister will not persist with it.

I have been treated with great courtesy and patience by honorable members of the committee, and I do not intend to speak at very much greater length. Broadly speaking, we are raising too much revenue. Our Customs and excise receipts this year are estimated to yield £40,000,000. When the per capita payments were being considered in 1910, the best experts of the Commonwealth and the States were asked to estimate our receipts from Customs and Excise duties for at least ten years. They guessed £15,000,000 a year, and it was thought that on that figure the Commonwealth could carry a per capita payment to the States of 25s. a head. When the war occurred our Customs duties were heavily increased, and many of ‘ them still remain at the high point they then attained. Although our war expenditure has not yet disappeared entirely - heavy expenditure for pensions, repatriation, and other matters intimately associated with defence, and for our sinking fund for the extinction of our war debt, is still bearing hard upon us - I venture to say that we are raising too much money through the Customs House. This promotes extravagance. As the AttorneyGeneral said when speaking as a private member, “ The Government has more money than it knows, how to spend.” Surpluses beget extravagance, and heavy indirect taxation increases the cost of living. I beg the Government to consider this when it is dealing with future tariff propositions. We are also raising too much loan money. We cannot hide from ourselves the fact that as fast, as we are reducing our war debt, we are heaping up another debt. What comfort can we derive from the knowledge that although in forty-eight and a half years we shall extinguish our war debt; we may in the same period build up another equally large debt for which we shall have no assets to take its place? There is no virtue in that. So long as the volume of our production, and the present price levels for our raw materials are maintained, things may be all right; but if extended droughts should hit this country and reduce our surplus of exportable produce, the people will send to the Treasury bench a government and a treasurer which will undo many of the things which this Government is doing.

Mr PROWSE:
Forrest

.- -It seems something like sacrilege for me to follow such a fluent speaker as the right honorable member for Balaclava (Mr. Watt), but I wish to make a few observations on the budget. I do not endorse the sentiments of honorable members who have adversely criticized the Treasurer for introducing the budget so soon after the close of the financial year. Since he has been in charge of the Treasury he has given close attention to his work, and has, on every occasion, submitted the budget to us at an early date.

There are some provisions in the budget with which I must disagree. I certainly think that there is foundation for some of the statements - I do not know whether they could be called charges - laid against the Treasurer by the honorable member for Yarra (Mr. Scullin). We all know that the Treasurer formerly argued that we ought to allow the people to retain as much of their money as possible, and take from them only what was essential for the purposes of government, but it has been shown clearly that in the four years he has been in office £40,000,000 more has passed through, his hands than passed through the hands of the treasurers who were in office for the preceding four years; and in the same period the cost of administration has been vastly increased. It certainly seems as though the Government has more money than is in the interests of the Commonwealth. A great responsibility is thrust upon it to husband its resources. I disagree with the new Commonwealth and State financial proposals. It appears to me that the Commonwealth desires to hand over to the States the less substantial forms of revenue and retain those which are more reliable. Our experience over a long period of years is that the Customs revenue is the most reliable that we have, but we do not intend to pass any of it over to the States.

I wish to say a few words on the proposals in the budget for compensating certain of the States because of injuries they have sustained through joining the federation. ‘ I refer particularly to Western Australia and Tasmania. I disagree with honorable members who have referred to those’ proposed payments as “ sops.” In my opinion they are inadequate compensation for injuries sustained through Federal legislation. That is not only my opinion ; it is also the opinion that the Royal Commission on Western Australian Disabilities reached after full investigation. The Tariff Board has also reported that the fiscal policy of Australia has been detrimental to Western Australian interests. The right honorable member for Balaclava suggested that the Government’s proposal should be withdrawn, and another scheme for a gradual decrease in the per capita payments over a considerable period of years substituted for it. I am not wedded to the per capita principle, for I consider it faulty in many ways. Payments to a State should not depend solely on the number of persons resident in it. I think it can be shown that a State like Western Australia, which covers almost one-third of Australia, but has only onesixteenth of the population within its borders, benefits comparatively little by the per capita payments. Western Australian trade with Victoria enables many persons to be employed here, in respect of whom she, and not Victoria, should receive the per capita payment. Unless equitable treatment is meted .out to Western Australia, it can hardly be expected that she will remain a loyal unit of the Federation. She cannot quietly concur in a continuance of the present trade disparity. The Navigation Act passed by this Parliament has really cut her off from the eastern States to such an extent that in many ways she might just as well be part of the “United States of America or the British Isles as of Australia. Whilst I compliment the Government upon having appointed a commission to inquire into the disabilities of Western Australia - no previous Government went even so far as that - I am sorry that it does not propose to carry out in their entirety, the recommendations that were made. The royal commission,, after the fullest investigation, recommended that in consideration of the injury that Western Australia had sustained through federation, she should be assisted to the extent of £450,000 per annum for 30 years; and I was certainly under the impression when the Government went to the country a few months ago that it intended to adopt that recommendation. That would be only a fair thing, seeing that our tariff duties have made the building up of sec:on. dary industries in Western Australia next to impossible ; But . instead, the Government has suggested some other method of assisting the State, and has accentuated its difficulties by increasing the Customs duties. The tariff has again been increased, and I believe that if the royal commission made a further inquiry it would recommend an even larger grant because of that increase. The people of Western Australia are not receiving one-tenth of ‘the sum that they are indirectly contributing to the Commonwealth, revenue. The Treasurer said that Western Australia, was in a prosperous condition. Great credit is reflected upon the citizens of Western Australia for the continuous efforts they are making to develop that State despite the handicap due to the vast area over which a comparatively small population is spread. They are taxed up to the hilt, and the cost of living is increasing rapidly. ‘ “Federation, instead of assisting that State, has prevented its people from carrying on secondary industries. The primary producers are compelled to buy in possibly the dearest markets in the world, and they have to sell their products in the open market. That disadvantage was acknowledged both by the Tariff Board and the royal commission. The taxpayers of Western Australia are, therefore, compelled to pay higher taxes than would otherwise be necessary to carry on the government of that State. Honorable members have twitted its representatives with asking for “sops.” Rightly or wrongly, the Federal Government decided to’ develop the sugar industry in Australia, declaring that this was necessary in order to populate the eastern coast of northern Australia and provide for its defence. It is computed that Western Australia pays normally £250,000 a year more for its sugar than it would if that commodity could be purchased abroad. That is one of its contributions to the other States. When it was obtaining bananas from the East, an open port was offered for its butter,’ flour,’ and wheat. That was an excellent chance to develop markets for the western portion of Australia. It did not pay the people of my State to obtain bananas from Fiji or Queensland ; but they had to offend their customers in Java and other parte” of the East because they could not enter into a. reciprocal .trade arrangement on account of the Queensland banana industry. Why should Western Australia be expected to give “ sops “ to Melbourne and Sydney manufacturers and to the Queensland sugar and banana growers? Its people have every right to ask that question. If they are to remain faithful adherents of federation, their interests must be considered. It may be said that that State is committed to the federal compact by -the Constitution; but I remind honorable members that no section of the people will suffer a wrong for any great length of time. Each partner in the union must receive some of the benefits. If a business man in Western Australia finds that by trading with the eastern States he increases his own taxation, and helps to reduce the taxation of the people in those States, he naturally feels that he is being unfairly treated. The Government apparently thinks that it is better able to deal with the problem than the royal commission that investigated it. It talks about taking over the northern portion of Western Australia and contributing £150,000 in exchange for it. I suggest that it should first show that, it is able to govern such a territory. Despite Western Australia’s lack of financial strength, it has brought about greater progress in the north-western portion of that State than has been made in the Northern Territory. I advise the Government to act on the royal commission’s Suggestion, and give my State fiscal freedom for 25 years. Then it would be able to determine how to collect its own revenue and how to spend it. I was glad to hear the right honorable member for Balaclava (Mr. Watt) utter a warning as to what might happen if Australia experienced a succession of drought years. Western Australia is trying to increase its exports, and it has done a good deal to assist the Commonwealth to shoulder £1,000,000,000 of debt within Australia. If the prices received for’ wheat and wool had not remained high since the war, that State and the Commonwealth would be in a sorry plight to-day, because the cost of production has nearly doubled. If those prices dropped it would be impossible for the primary producers to carry on their operations at a profit. The slogan of the Prime Minister (Mr. Bruce) was, “Men, money, markets.” Western Australia has men of the right type, and if they were not hampered by high Customs duties they could find enough money to produce at a cost that would enable them to secure markets. The migration proposals of the Government show that the importance of settling people on the land is not overlooked. When the Development and Migration Bill was before us, I said that I hardly expected the scheme to be successful. Most of the migrants’ will have to be absorbed in the western State, because of the large area of suitable land available there; but the chief benefit will be derived by the Commonwealth. Every immigrant will increase the demand for such goods as clothing, tools and machinery, and that will mean increased Customs revenue. The citizens of Western Australia, however, will be taxed to help maintain the migrants for a considerable time. That State has great potentialities, and it is the duty of the Government to assist it substantially. Greater prosperity would be brought about if markets were arranged on a reciprocal basis. I regard good roads as most necessary in a young country like Australia, and therefore I was pleased when the announcement was made that the Government proposed to vote £20,000,000, to which the States were- to add £15,000,000, for roads construction. I have not studied the constitutional aspect of the matter, but I understood that the money was to be taken either out of revenue or from road users. I was appalled when the Minister for Trade and Customs brought down his new schedule for the alteration of the tariff. It predicates that the users of the roads are not going to pay the tax to provide for their construction and maintenance. That is grossly unfair, and I . would almost say that it is dishonorable. Recently the Parliament, after months of delibera- . tion, decided what protection should be given to the various Australian industries. It agreed to duties of 25 per cent. British, 35 per cent, intermediate, and 45 per cent, general on motor tires, or fixed rates of ls. 6d. per lb. British, 2s. per lb. intermediate, and 2s. 6d. per lb. general, whichever rates produced the greater revenue. Now the Government proposes to impose an extra duty on imported tires. The rates are to be raised from ls. 6d. to 2s. per lb. British, 2s. to 2s. 6d. per lb. intermediate, and 2s. 6d. to 3s. per lb. general. I submit that locally-made tires wear out the roads just as much as do imported tires, and I further submit that when the imported tire has paid a duty to secure its admission into the Commonwealth of ls. 6d. per lb. under the British preference tariff, or of 2s. or 2s. 6d. per lb. under the intermediate and general tariffs, it has purchased its. naturalization. The unfairness of the Government’s proposal is that it is being used insidiously to increase the protection of the locally-made article, for no excise has been suggested on locally-made tires. The same argument applies to the proposed duties on petrol. The Commonwealth Oil Refineries Company does not distribute petrol in “Western Australia, though it does in Melbourne, therefore the Victorian motorist may run free on the roads because he uses Commonwealth Oil Refineries petrol and locally-made tires, whilst the Western Australian motorist has to meet taxation on the petrol and tires he uses. The proposal is most unfair. If the incidence of protection agreed to by the Parliament within the last few months is right it should be allowed to remain. If the Government had proposed a revenue tariff for a specific purpose and had imposed an extra duty on imported tires with a similar excise duty on locally-made tires, I could have accepted that, because it would have meant that users of roads should provide the funds for constructing and maintaining them. I must, however, oppose the proposal which the Government has submitted. The right honorable member for Balaclava (Mr. Watt), who knows something about the tire business, was perfectly right when he said that the duty on tires proposed in the tariff which we have already passed is quite high enough. The duty under the British preference column on a 30-in. x 3^-in. B.E. cord tire for Ford cars is £1 6s. 5d, With a duty of 2s. 6d. per lb. it comes to £1 10s. 7£d., or 115$ per cent. The new duty of 3s. per lb. will bring the amount up to £1 16s. 9d., or 139 per cent. The object of the new proposal is to secure a certain amount of revenue, but the duties now proposed are prohibitive of importations, and will fail in their object. They will not produce revenue, and will, in fact, have a serious effect upon the revenue previously received from this source. A semi-cushion back tire for a Ford car weighs about 90 lb. Ninety times 3s. is £13 10s. This is the protective duty on a single tire.

Mr PRATTEN:
MARTIN, NEW SOUTH WALES · NAT

– Is the honorable member quite sure of his figures.

Mr PROWSE:

– I am referring to a Ford car with a 90-lb. back tire. Would the Minister like to see one in the morning?

Mr PRATTEN:
MARTIN, NEW SOUTH WALES · NAT

– I should like to see a 90-lb. semi-cushion tire for a Ford car.

Mr PROWSE:

– A semi-cushion back tire for a Ford car weighing 90 lb. carries a duty under the tariff we have passed of £11 5s. On top of that the Government now superimposes another 6d. per lb., bringing the duty on a single tire to £13 10s., and although that enormous duty is imposed upon the imported tire the locally-made tire is not to be asked to contribute anything towards the maintenance of the roads. The Government’s proposal is absurd. In Western Australia the State Government levied a petrol tax, but it did not levy it upon those who did not use the roads. It exempted from payment of the tax petrol used for farm machinery, and stationary engines. I have said that the proposal of the Federal Government is insidiously used as an additional protection for the local tiremanufacturing industry. When I was asked to vote to enable the Commonwealth to enter into partnership with the Anglo-Persian Oil Company I was assured by the then Prime Minister (Mr. Hughes) that the association of the Commonwealth with the company would cheapen petrol, and a duty upon it would not be required. There is much in the budget to which I am very seriously opposed. I am not satisfied either with the action taken by the Government to deal with the special position of Western Australia. It does not fully appreciate the position in that State. Credit should be given to the people of that State for the way in which they have struggled to surmount enormous difficulties which they should never have been asked to face, and they should be allowed to develop the resources of the State without interference by the Commonwealth Treasurer.

Mr LATHAM:
AttorneyGeneral · Kooyong · NAT

T9.40].’ - The financial proposals of the Government contained in the budget are, I submit, founded upon sound financial and Federal principles. They are based upon the sound financial principle that, as a general rule, a government should be responsible for raising the money which it spends. It is only by applying that rule that we can have true responsibility in government, and particularly in that very important department of government involved in finance. The proposals again are based upon the sound Federal principle that the financial independence of the States should be secured, as far as possible, and that they should not be allowed to remain to a degree, greater than is avoidable, dependent upon the will of the Commonwealth Parliament from year to year. It has been said that the States have a moral right, though it is not contended that they have any legal or constitutional right, to receive a payment of money regularly from the Commonwealth. That right, I suggest with the fullest respect for those who have advanced the argument, entirely disappears, upon examination. These financial matters, as the right honorable member for Balaclava (Mr. Watt) has pointed out, were fully discussed in the years immediately preceding federation, and the Constitution bears evident marks of the compromise which was then reached. That compromise is embodied more particularly in section 87 of the Constitution, known as the Braddon section, which expressly provides that -

During a period of ten years after the establishment of the Commonwealth and thereafter until the Parliament’ otherwise provides, of the net revenue of the Commonwealth from duties of Customs and of excise, not more than onefourth shall be applied annually by the Commonwealth towards its expenditure.

During the first ten years it was made perfectly clear that not more than onefourth of the Customs and excise revenue should be used for the expenditure of the Commonwealth. The second part of section 87 provides -

The balance shall, in accordance with this Constitution, be paid to the several States, or applied towards the payment of interest on debts of the several States taken over by the Commonwealth.

There are other special provisions dealing with periods until the imposition of uniform duties of Customs, and dealing also with the first five years of federation. The essence of the matter is that the Constitution contains an express provision which gives the States a constitutional right to receive three-fourths, or possibly more, of the Customs and excise revenue from the Commonwealth during the first ten years, and during that period only. The Constitution expressly provides that after that period the determination of this matter shall lie with the Federal Parliament. The honorable member for Perth (Mr. Mann) suggested that the words “ until Parliament otherwise provides” mean that the Parliament is bound to make an affirmative provision from time to time/ for the distribution of moneys to the States. A reading of the Constitution shows that those words mean until Parliament legislates on the subject as it thinks proper. The same phrase appears in nineteen sections of the Constitution, to which I have had the opportunity to refer since the honorable member spoke, and in each instance it means until Parliament legislates on the subject in a manner different from the original provision.

What is meant by the claim that the States have a moral right to receive a proportion of the Customs and excise revenue? A right in financial matters must surely be definable by reference to some stated sum. There is definite constitutional provision for the return to the States of three-fourths of the Customs and excise revenue for the first ten years. If after that period the States retain a moral right to receive some money from the Commonwealth, what is the amount? Nobody can define it, and no intelligiblearrangement of the finances of Commonwealth and States can be founded upon the alleged moral right. It is not suggested that there is a moral right to 25s. per head, or any sum based upon any other factor.

If the relations of the Commonwealth and the States are examined in the light of one of the fundamental principles of federation, the right of the States to receive moneys from the Commonwealth after the first decade of federation completely disappears. The fundamental principle or understanding upon which the Constitution is based is that the Commonwealth shall have full and unfettered powers of taxation and shall not be financially bound or manacled after the first ten years. But prima facie, the Commonwealth charges were to be met from Customs and excise revenue. That that is the basis of the Constitution can be readily seen by reference to the convention debates. Indeed, it appears plainly enough in the Constitution itself, because the one exclusive power of taxation conferred upon the Commonwealth, and which the States are constitutionally incapable of exercising, is the imposition of duties of Customs and excise. Necessarily the revenue from this source after the first ten years falls into the hands of the Commonwealth, and prima facie Federal expenditure is to be met out of Customs and excise revenue without recourse to direct taxation. Undoubtedly the Commonwealth Parliament has power to impose direct taxation, if it thinks proper, for the raising of revenue or in accordance with some rule of policy, as in the case of the land tax of 1910. As a general principle, however, the Commonwealth is expected to meet its obligations, as far as possible, from Customs and excise revenue, and if it raises from that source more money than it needs for its legitimate requirements, it is quite proper that the balance should be handed over to the States or that the revenue from that source should be reduced, if that should be in accordance with the policy of this Parliament. If the receipts from Customs and excise were only sufficient to meet Commonwealth obligations, could it be suggested that there was an obligation on this Parliament to increase or vary Customs duties in order to obtain moneys to hand back to the States? Such a contention could not be maintained for a moment. Recognizing that in the first instance Customs and excise revenue is the basis upon which Commonwealth expenditure must rest, let us examine the financial position of the Commonwealth to-day. The £39,000,000 of Customs and excise revenue is more than absorbed by indisputably legitimate Commonwealth charges. Interest on war loans, with war pensions, amounts to £29,000,000, old-age pensions to nearly £9,000,000, and defence expenditure to £5,000,000; “ a total of £43,000,000. After meeting these and various other obligations of the Commonwealth this Parliament has to find about £7,000,000 to pay to the States as a capitation grant. Is it not clear that the Commonwealth is imposing direct taxation in excess of its own needs for the mere purpose of making the per capita payments to the States? That statement of the facts is not answered by the contention that revenue cannot be ear-marked. In a sense it is true that revenue cannot be ear-marked or allocated to a defined expenditure; but if the general principle is that the Commonwealth should not impose direct taxation unless the Customs and excise revenue which it raises in accordance with the general policy of the nation is insufficient to meet its requirements, surely it is proper first to set Commonwealth charges against Customs and excise revenue, and then inquire for what purposes, if any, this Parliament should impose additional taxation.

Mr RODGERS:
WANNON, VICTORIA · LP; NAT from 1917

– The land tax was imposed ostensibly to pay for the Navy, and the entertainments tax and estate duties as war-time measures.

Mr LATHAM:

– Various reasons are assigned from time to time for the imposition of taxation, but all these imposts are really designed to meet the financial needs of the Commonwealth in accordance with a policy determined by this Parliament. During the war it was necessary to raise more revenue than had been raised before, and accordingly new sources were tapped. Customs and excise duties could have been increased or decreased in order to swell the revenue, but other courses were considered more fitting. In any case, we have to deal with the actual financial position to-day, which is that the Customs and excise revenue is more than absorbed by necessary Commonwealth expenditure, and that if the capitation payments to the States are decreased or abolished direct taxation can be reduced.

There has been a great deal of misunderstanding of the proposals that the Government is making for the adjustment of the financial” relations of the Commonwealth and the States. I have seen frequently the statement that the Commonwealth is merely proposing to discontinue the payments to the States, and is not suggesting any reduction of taxation, whereas, in fact, the Government’s proposals involve the repeal of the land tax, the entertainments tax, and the estate duties tax, and the reduction of the income tax by 40 per cent. By such repeals and reductions the taxpayers will be relieved of a burden exceeding the amount at present paid to the States by way of capitation grant. The figures upon which the Government’s proposals, are based have been printed and circulated ; the source of every amount is set out, and, so far as I know, none of the figures have yet been challenged. It is true that the States have contended in general terms that they could not raise as much money in the areas to be vacated by the Commonwealth as they now receive by way of capitation grant, but that does not affect my contention that the information upon which the Government’s proposals are founded has not beeu challenged. This matter has to be considered, not from the point of view merely of the governments of the Commonwealth or of the States, but with a desire to do what is best in the interests of the people as a whole, because, whether they be regarded as citizens of the State or citizens of the Commonwealth, they are the same people.

Mr Foster:

– Do the proposals of the Government imply an intention on the part of the Commonwealth to evacuate the whole area of direct taxation as soon as possible?

Mr LATHAM:

– Certainly. I agree with those honorable members who have said that the financial relations of the Commonwealth and the States should not be based merely upon some abstract general principle. I agree that, although the principle that a government shall be responsible for raising what it spends is sound, it ought not to be pushed to unfair extremes; but, so far as it can be applied reasonably, it should be applied. To determine how far it can be applied, it is necessary to have regard to the financial needs both of the Commonwealth and the States. At the present time the States are financially dependent upon the Commonwealth Parliament ; they have no constitutional right to the money they receive, but are dependent for it merely upon the continuance of a Commonwealth statute - the Surplus Revenue Act- which can be repealed by this Parliament at any time. As long as the present Government, or a Government of similar political views, is in office, it is not at all likely that that will be done without making provision for the States to recoup themselves; but some honorable members’ on the other side have from time to time indicated that it would be possible for a Labour Government to finance some of its schemes, not by putting on fresh taxation, but by reducing or abolishing per capita grants. That is a prominent feature of the situation, and, as long as conditions remain as they are, it is possible for the Commonwealth Parliament, if controlled by a Government inneed of money, to acquire large sums at the expense of the States. The States will continue to be in a position of absolute financial insecurity and dependence upon the governings party in the Commonwealth so long as the Commonwealth partly finances the States on a capitation basis.

Mr RODGERS:
WANNON, VICTORIA · LP; NAT from 1917

– A plank in the platform of the Queensland Labour party states that per capita payments will not be abolished by that party.

Mr LATHAM:

– The Federal Labour party has a unification plank in its platform, and that means ocmplete control of all legislative and other activities of Australia by this Parliament. The easiest way to bring about unification is to leave the financial condition of the States as it is to-day, because by simply repealing the Surplus Revenue Act, without imposing fresh taxation, the position may be made financially impossible for the States. Unification can readily be brought about by the financial strangulation of the States, if the per capita payments remain; but, on the other hand, if the proposals of the Commonwealth are adopted, the States will no longer be dependent on the Parliament of the Commonwealth for the large sum of £7,000,000, and the Parliament of the Commonwealth will no longer be able to bring about unification by the mere repeal of a Commonwealth statute. If the Commonwealth Parliament needs more money, it would, under the proposals of the Government, have to accept the responsibility of imposing fresh taxation, which would be a very different political proposition from a mere re pealing of the Surplus Revenue Act. In other words, the Government’s proposal gives the States a -better’ guarantee of financial stability than they now have, and will ensure their financial independence and security. The proposal is the best safeguard of the Federal principle that has ever been. made.

As a Victorian member of this Parliament, I am naturally interested and concerned iti the attitude of the Victorian Government. I can readily understand that attitude, because the State Parliaments will have to accept the responsibility of raising, by means of taxation, the money which they spend. From the point of view of a Treasurer of a State, it is much more comfortable and easy to be in receipt of regular monthly cheques from the Commonwealth than to accept the responsibility of raising by taxation the money required. It is easier still if the States can at the same time continue to charge the Commonwealth Government with raising too much money by taxation. I can readily understand the objection of the Governments of the States to shouldering this responsibility of showing their taxpayers how much money they spend on the discharge of State functions; but, although one may sympathize with a friend who has an unpleasant responsibility placed upon him for the first time, that is not the only aspect of the question to be considered.

In common with other Victorian members of this Parliament, I have received from the Treasurer of Victoria, Sir Alexander Peacock, a pamphlet setting forth the case for the Victorian Government. I purpose to refer to some of the statements contained in it, because we may not unfairly assume that they represent to some extent the general view of the States. The pamphlet commences by referring to the financial difficulties of the States. All governments are in financial difficulties when they have to raise an increased amount of money; but this question has to be regarded from the point of view of whether the States will be pecuniarily worse off than they have been in the past. The postponement for one year of the operation, though not of the enactment, of the legislation to give effect to the proposal will show whether the anticipations of the Commonwealth financial authorities as to the amount of money that will be collected from the surrendered fields of taxation is accurate. I expect that at the end of the year the estimate of the returns will prove to have been very moderate. They were based on returns from reduced rates of income tax and entertainments tax; much larger sums have been raised from those sources in the past. In the past year about £9,000,000 was raised by income tax, but a few years ago £16,000,000 was raised from that source. There is no doubt that the sum of £7,000,000 can be raised in Australia from the surrendered taxation areas. The Treasurer of Victoria proceeds to say -

In pursuance of some theory, the CommonWealth Government now demands the separation of Commonwealth and State finances.

Sir Alexander Peacock knows perfectly well what the theory is - that one of the principles of responsible government is that a government shall, so far as possible, raise the money it spends. The pamphlet also states -

At the inception of federation it was thought that the best interests of government could be served by Commonwealth and Stale finance being interwoven.

That is a statement I take the liberty of challenging. I am well aware that I am much younger in political experience than Sir Alexander Peacock, who was a member of the convention which drafted the Constitution. But surely honorable members who have given any attention to this problem know that one of the difficulties in bringing about federation was that of making the finances of the Commonwealth and the States independent. It was far from being the view at that time that the best interests of government would be served by the Commonwealth and State finances being interwoven; the contrary opinion was held. That is why the clause which has been so often referred to was known, not as the Braddon clause, but as the “Braddon blot”; it shackled the Commonwealth, and made the States financially dependent on the Commonwealth. That arrangement was the only one possible at the time on account of the needs of the States, the manner in which they raised their revenue, and the relatively small needs of the Commonwealth. The pamphlet then says -

The Constitution originally framed provided for three-quarters of the Customs and excise revenue being paid to the States for all time.

But that is the provision that was not adopted. A ten-years’ limitation was placed upon it. One of the elements of the Federal system is that there is a Central Government and State Governments,, that each is independent and sovereign in its own sphere, that the different spheres are set forth in the Constitution, and that no government operating within its own sphere is subject to the control of any other government. That is the principle which the Government for the first time now seeks to apply, as far as possible, in finance. I say “ as far as possible,” because it is recognized in the Constitution, and in the proposal of the Government, that financial assistance must be given to certain States. Accordingly, there are practical limitations to the adoption of the principle. The pamphlet contends that -

Any action to disturb existing relations should only be taken under the authority of the people, direct or indirect. But the Commonwealth will not trust the people.

The Prime Minister and the Treasurer, at the last general election, said quite plainly that it was their policy to separate Comonwealth and State finances. What is this statement about referring the matter to the people? Section 87 of the Constitution expressly provides that this matter shall be determined by the Parliament of the Commonwealth. No amendment of the Constitution is required to give effect to these proposals, because the Constitution expressly places the power of dealing with this matter in the hands of the Commonwealth Parliament. It must not be forgotten that in 1911’ the people rejected a proposal to embody the capitation payment of 25s. in the Constitution. The Commonwealth Parliament, in carrying out its financial proposals, is not only exercising a right, it is also performing a duty. It would be easy for the Government to side-step this difficult problem, but it recognizes that if the present condition of things were allowed to remain unaltered indefinitely, the position of the States would be so insecure and so cn- tirely at the mercy of this Parliament, that any party in power in this Parliament opposed to the federal system could, by the simple and easy method of repealing a single Federal statute, force unification upon Australia. That is one of the principal reasons underlying these proposals. The pamphlet says -

The Government knows that the overwhelming weight of public opinion is against the proposals.

I differ from that statement. I am well aware that the press, as a whole, is not favorable to the proposals ; but I have had the experience df addressing a considerable number of meetings on this subject. I have found that, generally, the proposals are, at the outset, disapproved, but when I have explained the situation, the feeling is changed immediately. Many people whom I have addressed had no idea that the Commonwealth intended to repeal or reduce any of its taxation. They thought that the Commonwealth taxation was to continue, and that the capitation grant was simply to be withheld from the States. The true explanation was a revelation to many of them. I showed them that these proposals, if given effect, would place the States in a position of greater financial independence and security than they enjoy at present. The pamphlet, after accusing the Federal Ministers of a lack of federal spirit, says -

They- are heading for the tyrannical government of Australia from Canberra.

Exactly the contrary is the case. So long as the capitation system continues, the States are in effect subject to the control of this Parliament. The abolition of that system, and the repeal of the taxation as proposed, would place the States in a more independent position. The pamphlet states -

Among the revenue to be relinquished is the entertainments tax. This brought the Commonwealth nearly £700,000; now it only realizes £320,000.

The pamphlet suggests that this tax has become less productive with the years. The facts are that reductions have “been made in the original tax. The tax was at one time placed on tickets of ‘ 6d. and upwards. It later applied ‘ only to tickets of -ls. and upwards, “and now applies only to tickets of 2s. Cd. and upwards. That is the reason for the reduction in the amount received from the entertainments tax. That statement has probably been included in the pamphlet under a misunderstanding. In the same way income tax produces millions of pounds less- than it would if the original tax had not been reduced.

Mr Seabrook:

Sir Alexander Peacock knew the facts when he wrote that pamphlet.

Mr LATHAM:

– I do not think thathe would deliberately make any misstatement. The pamphlet also states -

The land tax and income tax are collected by the Government on principles varying from those adopted by the States.

Are we to take it that the States are never to vary the principles underlying their land and income taxation? Are these principles so sacrosanct that they are never to be reviewed or reconsidered when further revenue is required? The States, under these proposals, will be able to raise revenue in such manner as they think fit, provided that they are given time in which to adjust their taxation systems. It is true that there was a period of delay sufficiently long to enable the States to urge, with force, that they were placed in a difficulty by having to review their taxation systems for the current year, in the month of July. That objection has been completely met, and ample time will now be given for the States to vary and revise their taxation systems as they think fit. The pamphlet states -

The Commonwealth figures as to the effect of its proposals cannot be accepted.

The figures which have been set out by the Commonwealth have never been challenged. The source of every figure is given, and if any were wrong, honorable members can rest assured that that would have been pointed out by the States. That statement possibly refers to the effect of the proposals in relation to the States. The Commonwealth figures do not deal so directly with the effect upon the States. They do show the actu’al experience of the Commonwealth in the taxation fields concerned. Apparently, that reference ‘ is to the supposed difficulty of aggregation. The right honorable member for Balaclava. (Mr. Watt) this evening suggested that there was something unconstitutional or illegal in aggregation. I am not aware of any principle with which aggregation, when properly applied, conflicts. I know that a Queensland act - and I believe that there are others in operation in the Commonwealth - provides that in determining the rate of tax upon property in Queensland, property outside that State shall be taken into account. The rate of tax is determined on the sum of the property inside and outside of Queensland. I have not yet heard it suggested that there is any legal weakness or constitutional invalidity associated with that system of taxation. I am quite unaware of the supposed constitutional difficulty to which the right honorable member for Balaclava has referred. He suggested that if, instead of that system being adopted, taxation were actually imposed upon, let us say, income derived from outside the State, it would be unconstitutional. I refer him to schedule D of the English Income Tax Laws, in the Lawn of England, Vol. 16, page 643, which shows that for many years the Parliament of Great Britain has been taxing under income tax, among other annual profits or gains, those accruing to any person residing in the United Kingdom, from any property whatever, whether situated in the United Kingdom or elsewhere, or from any profession, trade, employment, or vocation, whether carried on in the United Kingdom or not. That is sufficient to make my point. In Great Britain it has been thought proper to impose income tax on income derived from sources outside Great Britain. Our income tax act, it is true, imposes a tax only on incomes earned in, or derived from, Australia, but only because this Parliament has chosen to adopt that principle of taxation. It would be possible to tax a man, if within our jurisdiction, upon his income, earned or derived from any source in the world, and I am unaware of any legal or constitutional difficulty for either the Commonwealth or States in that respect. . I doubt whether it would be necessary for the States to resort to any of these methods of taxation. . The actual figures show an increase, in recent years, of returns from income tax - making allowance for reductions in the rate of taxation - of 6 per cent, per annum. A similar increase could be expected in the other avenues of taxation open to the’ States, and this ‘would -probably- make this species of aggregation quite unnecessary, but if aggregation were desired, it could be accomplished. The pamphlet further states - ,

The States are equitably entitled to a share of the Customs revenue.

I have already dealt with that. It further states -

There can be no guarantee that the Commonwealth will not hereafter resume the relinquished taxation.

That undoubtedly is the case, as the honorable member for Perth has ‘stated. He said that these taxes are being repealed, but can be re-imposed by the Commonwealth at any time.

Mr Gregory:

– The honorable member for Yarra (Mr. Scullin) said that the Labour party, when it obtained office, will re-impose the land tax.

Mr LATHAM:

– There cannot, I agree, be a guarantee to the States that these taxes will not be reimposed. It would be open to honorable members opposite, if they were in power, and if they so desired, to bring about unification - very easily at present, as I have shown ; but it is very difficult to introduce new taxation. It has first to be justified in the House and before the country. The best guarantee that can be given to the States under existing conditions is that the position as established could not be changed unless the Commonwealth Parliament took the responsibility of imposing new taxation. That is a degree of guarantee that they have not at present, and which would greatly secure their financial position. It has been argued that the Government’s proposals do not take into account arrears of taxation ; but that is not so. The full amount collected from the taxes in question during the current year, together with the whole of the arrears, will be paid to the States. There will be a guarantee for the coming year of at least as much as the per capita payments would yield, and the States would have twelve months in which to re-adjust their finances. Another sentence in this pamphlet reads -

The Commonwealth should not be immune from financial criticism.

I can hardly think that the Treasurer of Victoria believes that the Commonwealth is, or will be, immune from such criticism. I have not been a member of this Parliament for very long, but I have not observed any growing signs of such immunity. The final sentence with which I wish to deal reads -

Why should the whole of the war costs be paid for out of Customs and excise revenue? If any tax is appropriate for war effects it is the income tax.

I have partly dealt with that matter already. The Commonwealth has the sole right to levy Customs and excise duties, and its expenditure should be met, as far as possible, out of the resulting revenue.

So far as any figures have been published on this matter, they have shown that these proposals will be beneficial to Victoria in that they will lead to a definite relief from direct taxation. General statements to the contrary have been made, but they have not been supported by precise figures. It has been suggested that even if these proposals are sound in principle, they have been introduced at the wrong time and in the wrong way. “ The time is not ripe “ is one of the most mature arguments in the history of the world. I suggest that this is an appropriate time to deal with this real problem which we shall have to face sooner or later. As I have already said, it would have been far easier for the Government to evade it than it has been to tackle it.

Mr Gregory:

– It was evaded last October.

Mr LATHAM:

– The Prime Minister dealt with it in his policy speech; and it has been under public notice for the last three years. It has not been sprung upon the public in any sense” of the term.

The right honorable member for Balaclava (Mr. Watt) suggested that the Government should withdraw this scheme and adopt in its stead a proposal that he made in 1919 for- a reduction of the per capita payments by 2s. 6d. a year for six years. He suggested that it would be far better to deal with it in that piecemeal fashion. The right honorable- member further said that regard must ‘be had to the fact that the Legislative Councils in the various States could not be expected readily to agree to the imposition of the taxation necessary to provide, the State Treasurers with the revenue they required. The Government’s method of dealing with the problem is preferable to that proposed by the right honorable member, which would involve an annual battle with ; the Legislative Councils when each proposal came along for the halfcrown reduction, and a further ‘battle when the 10s. stage was reached. There would be a regular annual struggle when the State Treasurers endeavoured to make up the amount lost by the reduction of the per capita payment. It would involve a serious controversy upon every conceivable point. Another suggestion is that it would be better for the Government to take over the State debts and also to control State borrowing than to introduce a scheme of this kind. There may be objections to the proposals of the Government; but they are nothing like the objections that would be offered to a proposal that this Parliament should be equipped with power to control the borrowing and spending power of all the States and, therefore, the whole of their developmental enterprises.

The right honorable member for Balaclava was pleased to approve of a speech that I made in this House on the 9th September last, on the motion for the second reading of the M,ain Roads Bill. I am glad that the sentiments I expressed meet with his approval, for I still hold them. I support the roads policy of the present Government, because there is a marked distinction between it and the proposals contained in the Main Roads Acts that the last Parliament passed in 1923, 1924 and 1925. Those measures provided that certain sums should be payable to the States out of the Consolidated Revenue, according to the schedule contained in the Act; and that the GovernorGeneral should prescribe the class of roads to which the money should be applied. I regarded that as legislation upon the subject of main roads. But had the right honorable gentleman read the whole of my speech he would have seen that just after the passage which he quoted, I observed that the proposals in the bill, then under notice, might- have been justified, had they been advanced as “financial assistance to the State,” but they were not so placed before the Parliament. The road policy which the Government will be presenting to honorable members shortly is based upon the provisions of section 96 of the Constitution, which reads -

During a period of ten years after the establishment of the Commonwealth and thereafter until the Parliament otherwise provides, the Parliament may grant financial assistance to any State on such terms and conditions as the Parliament thinks fit.

Legislation of that character for the purpose of granting financial assistance to the States is in every sense constitutional. I point out further, as an important feature, that the Government’s proposals are dependent upon agreements being made with the States.

Mr Scullin:

– Would it be constitutional to collect money by means of a Federal tax in a State that does not make an agreement with the Government ?

Mr LATHAM:

– The Commonwealth has the fullest powers of taxation, and there is no doubt whatever that it may collect whatever Customs and excise duties it thinks proper, and apply the money as it pleases. As the honorable member for Yarra knows, there must be no discrimination in taxation between the States. As at present advised, I have no doubt that the proposed petrol tax would “be quite constitutional. Some of the criticism of it has been based on the assumption that the whole burden of road-making in Australia is being placed on the shoulders of petrol users and motorists. The facts are that under the Government’s proposals the Commonwealth will find £2,000,000 per annum for roads, and the States £1,500,000 per annum. Of the Commonwealth’s share £500,000 is to be provided out of general revenue, and £1,500,000 out of the proposed new Customs duties; and the States are to find their £1,500,000, as they think fit from loan or revenue. Accordingly, whatever objections may be offered to the petrol tax it cannot be said truthfully, that the whole burden of road construction is being placed on the shoulders of petrol users. Apart altogether from this £3,500,000, probably £11,000,000 or £12,000,000 is being spent annually by various bodies on roads in Australia, so that the £1,500,000 it is proposed to raise from the motor-owners is a very small proportion of the total expense. It can hardly be maintained that’ that is an excessive proportion to be borne by a section of the community so directly interested in roads as motorists are.

I was interested to hear the honorable member for Yarra (Mr. Scullin) speaking on the old subject of the taxation of Crown leaseholds. We all had a good time with that during the last election campaign. I enjoyed the questions put to me on that matter better than any others, because I had such a complete answer to them. The charges made by the honorable member were referred to a royal commission, which found absolutely against him on every charge.

Mr Scullin:

– That statement is incorrect.

Mr LATHAM:

– The charges made by the honorable member are set out plainly in the front of the report. I invited my audiences during the election to mention any charge that was not submitted to the royal commission, and I heard for the first time this afternoon that the taxation reports had not been submitted by the Treasurer.

Mr Scullin:

– Did the honorable member not hear me quote the judge as having said that he was not permitted to inquire into the reason why the tax on Crown leases was not collected ? The honorable member did not want to hear that.

Mr LATHAM:

– The honorable member knows perfectly well that the reason for the non-collection of that tax has been apparent to the community for years. The last evidence of that is the judgment recently delivered by His Honor Mr. Justice Rich, showing that it was practically impossible to collect the tax imposed upon those leaseholders by Labour under a section to which nobody has yet been able to attach an intelligible meaning. The seventeen charges set out in the report are substantially those made by the honorable member. They were investigated and disproved.

Mr Brennan:

– Did the honorable member for Yarra formulate them, or did the Government “fake” them?

Mr LATHAM:

– They contained the words of the honorable member, according to his speeches in Hansard.

Mr Brennan:

– They are words torn from their context.

Mr LATHAM:

– They are the honorable member’s own words.

Mr Brennan:

– It was a gross and dishonest distortion of the honorable member’s meaning, and the Attorney-General knows it.

The honorable member for Batman continuing to interject, notwithstanding the Temporary Chairman’s call for order -

page 4264

THE TEMPORARY CHAIRMAN

(Sir Granville Ryrie). - Sergeant, remove the honorable member.

The TEMPORARY CHAIRMAN:

– The honorable member must apologize.

Mr Brennan:

– I do that. I am sorry if I have offended the Chair.

The TEMPORARY CHAIRMAN.The honorable member defied me.

Mr Brennan:

– I regret having defied you; but I adhere to what I have said.

Mr LATHAM:
NAT

– The words submitted to the royal commission, as constituting the first charge, were as follow -

Pages 2976-7- Against that we have £189,957 outstanding for last year. The Treasurer gave not a word of explanation of that. He smoothed it over and smothered it. It is one of the first things that he ought to have explained in the budget speech. The excuse cannot be that the collecting of taxes on Crown leaseholds is intricate and difficult, because they are not included in the last year’s assessment. Who owes this money? There is plenty of evidence that the Government relentlessly pursues the small man when he owes anything.

Mr Scullin:

– I stand up to every one of them, but I wanted them presented in their proper context.

Mr LATHAM:

– These are nob the words of the Treasurer; they are words of criticism and abuse of the Treasurer.

Mr Scullin:

– They were dragged from my speech by the Treasurer.

Mr LATHAM:

– Another extract from the speech of the honorable member, submitted to the royal commission, was as follows : -

Page 3253 - For several years the administration of the taxation office has been unsatisfactory to the people. It hasbeen carried on in defiance of the law under which the taxes are raised; in fact, the Commissioner and his officers and the Treasurer, who is the ministerial head of the department, are annually breaking the law of the country.

I understand that to refer to the nonpresentation of the reports. Therefore, what the honorable member said this afternoon had been omitted was not among the things omitted.

Mr Scullin:

– The honorable member ought to be fair. The only matters inquired into were those stated in the questions submitted. The judge ruled that he could not inquire into what was stated in the extracts from my speech.Will the Minister quote the questions submitted to the judge? I challenge the Minister to find the other matter among those questions.

Mr LATHAM:

– The following was the reference to the commission: -

Know ye that we do… appoint you to bea commissioner to inquire into the matters referred to in the extracts from Parliamentary debates which are contained in theaccompanying schedule.

I ask whether those matters were not referred to the commission ? Some of those extracts I have read to the committee.

Mr PARKER MOLONEY:
HUME, NEW SOUTH WALES · ALP

– Some of them, only.

Mr LATHAM:

– There are plenty more. Take one of the principal charges as to the Government relentlessly pursuing small taxpayers and letting off large taxpayers.

Mr Scullin:

– I proved that.

Mr LATHAM:

– The honorable member still maintains that he proved it; but the judge who heard the evidence reported as follows: -

It is not correct to say that the present Government relentlessly pursues persons who owe small amounts of land tax and is less strict in collecting land taxfrom those who are assessed for large sums. The big pastoralists have no advantage in this regard as compared with the struggling farmer and the small land-holder.

Mr Scullin:

– What about the big pastoralists in the Northern Territory?

Mr LATHAM:

– They received no preference over small land-holders. The judge further said -

I can see nothing in these figures, or in any facts before me to warrant any suggestion that discrimination was made between large and small taxpayers, and I emphasize the fact that the Government in no way interfered with the Commissioner of Taxation in respect of any of these matters.

Could there be a more complete exoneration of the Treasurer and the Government from the charge made against them? The honorable member, having appeared before the judge through counsel, and having had the fullest opportunity to submit all the evidence he could obtain, failed to establish his charge. Nevertheless he repeats it.

Mr Scullin:

– Has the Minister never appealed against a decision that went against him ?

Mr LATHAM:

– I suggest that the honorable member, having failed in the election propaganda that this charge was intended to provide, should give up the contest, realizing that there nas been an inquiry, and that the charge has not been substantiated. The report of the commission is available to all honorable members. Although the speech was not printed verbatim in the schedule, every substantial matter was set forth, and the questions that were asked enabled the honorable member to adduce all the evidence he could bring to support his allegations. I submit that he failed entirely to support them, and ought to accept his defeat.

Progress reported.

House adjourned at 11 p.m.

Cite as: Australia, House of Representatives, Debates, 15 July 1926, viewed 22 October 2017, <http://historichansard.net/hofreps/1926/19260715_reps_10_114/>.